ICAEW.com works better with JavaScript enabled.

Plan to avoid corporate reporting mistakes

In the wake of the FRC’s annual review of corporate reporting, errors or poor disclosures can be avoided when more time is invested in planning sessions, says Julia Penny.

"JuliaPenny"
Julia Penny

December 20018

In October 2018 the Financial Reporting Council (FRC) issued its Annual Review of Corporate Governance and Reporting for 2017/18. Interestingly, this was a change in title from the previous one, which was called the Corporate Reporting Review.

I have no doubt that the change of title is being used to emphasise the FRC’s role in corporate governance as well as corporate reporting and audit. However, the FRC does not currently have a monitoring role for corporate governance statements, so the information gathered is from third party research.

The report starts on a sombre note, with a mention of corporate failures such as Carillion, continuing issues over excessive CEO pay and a lack of transparency or objectivity on judgments and estimation uncertainty. All of these factors have hit the perception of trust in business.

So, what did the FRC find in its reviews of 220 reports and accounts in the year? Not unsurprisingly, disclosure of judgments and estimates, together with alternative performance measures (APMs) were the most common areas of concern. These were also identified as issues last year and were subject to a thematic review of judgments and of APMs in 2017.

As well as the continuation of issues with judgments and estimates, the FRC saw a rise in basic errors, which it commented on in its open letter to FDs and audit committees chairs. These basic errors included misclassification of cash flows and errors in EPS calculations.

Auditors, companies and their audit committees need to ensure that they have sufficiently robust controls in place to pick up any such errors in draft accounts and ensure their correction. A good checklist can help with this, but also a careful reading through of the accounts by someone with a good understanding of the requirements is likely to identify many of the issues.

As we move into the 2018 reporting season it is worth ensuring that all those involved in the preparation of statutory accounts and their audit have read the above reports and letters. Follow that with a planning session to identify how errors or poor disclosures can be avoided and the quality of corporate reports can be improved with just a little more time invested in them.

Julia Penny FCA is London ICAEW Council Member and Technical Director at SWAT UK @JSPenny

Liked this? Read these:

London Accountant

Go to London Accountant for more features, news and opinion.
Follow us on Twitter @ICAEW_London and join us on LinkedIn: LSCA and Croydon.
Subscribe to ‘regional updates’ to receive more articles.