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Corporate Finance Thought leadership

Evolution of
the reporting accountant's work

Reporting accountants play a vital part ensuring investor confidence, but ICAEW believes their role must evolve to better support growth in a changing landscape. Find out more in our latest policy paper: The value of independent assurance in capital market transactions.

Download the full paper
Cover of ICAEW Corporate Finance Faculty policy paper 'The value of independent assurance in capital market transactions'

Investor confidence vital for unlocking growth

ICAEW supports the UK government’s growth agenda and the role that sustained, flourishing and reinvigorated London capital markets can play. This demands willingness for investors to deploy capital in riskier business models. Investors need to be able to take informed risk when making such decisions. They must be confident that information provided at Initial Public Offering (IPO) is reliable and post IPO, the company will be fit to act as a public company, as well as maintain the same reliable standards of reporting.

Reporting accountants play a crucial role in ensuring investors can have confidence. In a changing landscape that role will evolve to better support growth while not losing sight of the value that assurance brings. But evolution must be approached holistically and  'The value of independent assurance in capital market transactions' outlines the key principles that evolution should apply and the pitfalls that must be avoided.

Pitfalls to avoid

In striving for growth, it may be tempting to make it easier for companies to list by reducing requirements including the extent of independent challenge. However, there may be unintended consequences if changes are made to the ecosystem without compensating measures being introduced. 

Further, a relatively small number of companies experiencing challenges could have a broader impact on sustained investor confidence and therefore growth. For example:

  • Companies not being ready at IPO to meet the materially greater public company reporting needs and accelerated timetables, could lead to delays in the first reporting cycle and a higher risk of restatements and/or profit warnings.
  • If working capital statements in relation to the capital structure at IPO are not appropriately independently challenged there is increased risk of companies having unexpected funding requirements post IPO.
  • Prospectuses not identifying material risks, such as around the sustainability of earnings could lead to unexpected results or financial exposures.

Moreover, the impact of unintended consequences may shape public company audit work and the willingness of non-executive directors to take on roles.

Principles for the future

ICAEW outlines four principles to which further evolution of the role of reporting accountants should adhere:

  1. Considering the work of reporting accountants holistically to maintain balance in the ecosystem;
  2. Commitment from all stakeholders to proportionate assurance and diligence processes, with a risk focused approach tailored to the specific company and its circumstances;
  3. Increasing consistency between the requirements at IPO and the ongoing reporting requirements or expectations post IPO, including:
    1. An approach to internal controls that creates greater alignment between the FPPP framework and the directors’ declaration of material control effectiveness.
    2. Aligning more closely the framework of assessing the company’s working capital position at IPO with that of going concern reporting as a public company.
  4. Seeking to increase the awareness and understanding of the extent of assurance and diligence that takes place at IPO, providing greater insight to investors and clarity of expectations to potential IPO candidates.

Assurance and the work of reporting accountants provide a strong basis for providing trust and confidence at IPO. Agreeing a fit-for-purpose model that enables the UK’s equity capital markets to support listed companies will be a challenge and will require engagement across the ecosystem.

ICAEW Corporate Finance Faculty The value of independent assurance in capital market transactions

Understand the context

Alongside offering these practical suggestions, ICAEW's policy paper, The value of independent assurance in capital market transactions, provides a valuable analysis of the context within which they operate.

Read a summary of the changing UK capital markets landscape, insights into the capital markets ecosystems and the UK model today, as well as the impact of recent FCA guidance changes.

Read the full paper

Join the discussion

ICAEW wants to hear your views on the future of the reporting account and the value of independent assurance to capital markets. Please contact David Petrie or Katerina Joannou from ICAEW’s Corporate Finance Faculty.

Contact David Contact Katerina

Further support

Influencing policy
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Capital markets reform

ICAEW's Corporate Finance Faculty been playing an active role in shaping capital market reforms to make the UK a more attractive place for companies to list.

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Resources from ICAEW's Corporate Finance Faculty on accessing global equity and debt, IPOs, infrastructure and project finance.

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