It is therefore important that those in business - and those responsible for making decisions which affect business – have a basic understanding of the financial reporting process and the various roles and responsibilities within it.
We recently published a new paper, "Financial reporting: who does what?", designed to address this very need.
This is the first in a series of essays we are producing on a range of issues to help inform the current reviews of audit and regulation of the market. Given the significance of the work of these reviews, and the gravity of some of the proposals coming out of them, it’s crucial that they are as well-informed as possible.
This publication sets out the duties and responsibilities of boards, auditors, shareholders, and other key stakeholders. It also highlights the complex relationships that exist between these different players, and explains the regulatory regime within which they operate.
A need for improvement
We’re also very clear that financial reporting needs to improve and that everyone involved in the process needs to do more.
Preparers, auditors, audit committees and shareholders all bear different responsibilities in ensuring the integrity of financial statements, but a holistic overview is necessary because of the complex way in which they all interact. The system has evolved over a long period of time, due to successive waves of legislation and regulation – resulting in a certain amount of duplication, internal inconsistency, omission, redundancy and misalignment. We have periodically called for rationalisation in a number of areas and will continue to press for reform.
I hope this paper will assist directors, politicians, investors and policymakers to gain an understanding of how the financial reporting process works, and where improvements can – and should – be made.