Tags: Corporate governance
This Board Briefing examines the challenges and pitfalls and presents the elements of responsible financial reporting.
In this Board Briefing, Guy Jubb, who has spent several decades looking at company accounts from the perspective of an investor, examines the challenges and pitfalls and presents the elements of responsible financial reporting.
Responsible financial reporting lies at the heart of responsible capitalism and, in today’s world, it is more than ever up to directors and, in particular, independent non-executive directors to ensure they do the right thing as a board when it comes to making choices about how to present profits and other key financial data.
Yet this is more than just a question of conforming to the rules laid down by standard setters. Most accounting involves judgment and all judgment contains an ethical dimension.
The board of directors has the ultimate responsibility to prepare and approve financial statements that show a true and fair view. The audit committee plays an important role in assisting the board by providing advice. But the buck stops with the board. In a unitary board, each and every director shares that burden of collective responsibility. It can be challenging for independent non-executive directors, especially when they do not have financial expertise, to engage effectively in board discussions about the financial statements.
To assist them, this Board Briefing examines a number of dilemmas that arise when preparing and approving financial statements. These include decisions around revenue recognition, mark-to-market valuations, changing accounting policies, and accounting policy choices.