Advisers in their various forms display the same traits - good at telling others what to do but not so happy to "eat their own dog food". When presenting to companies on the importance of transparency and best practices in reporting, I normally stop at some point and admit it's easy to be up the front telling others how to do it, when in reality the best reporting is achieved after a lot of hard work and effort. Critically this hard work and effort covers everything going on in a business from the way it’s led, to the quality of engagement with key stakeholders and the scope of the information that has been developed to run the business. The simple fact is that external reporting can do no more than reflect the internal reality. Put another way, you cannot report externally what doesn't exist internally - well some may try, but most are found out.
Furthermore, we often ignore the fact that external reporting's key value is the internal discipline that it creates back inside the organisation. Yes it provides the market with some information and signals - but the real value comes from the debates, discussions and arguments that it engenders within a management team and at the board. I'd suggest that if this hasn't happened, then the organisation hasn't challenged itself enough. The defence that we do just enough to comply is not good enough and in my experience it is short hand for we'd rather not confront key issues in the hope they might go away or be missed.
PricewaterhouseCoopers is not immune from this challenge and I was heartened by hearing Ian Powell our UK chairman admitting publically that he valued the discipline that the reporting process creates internally. If you haven't seen it, I attach a copy of our most recent annual report. For those of you who cannot get enough of this type of information you may also be interested in our UK Transparency Report - a public report required by our regulators which focuses on audit quality. Here again we have tried to follow the "dog food" principal and have gone beyond what's required by regulation. For those with an eye on the future, I'd recommend to you an article in the report written jointly by John McFall (Chairman of the House of Commons Treasury Select Committee) and Richard Sexton (PwC’s UK Head of Assurance).
It puts down a challenge to the profession to seize the opportunity brought about by the credit crunch and to question whether a different remit for auditors could enhance the profession’s relevance and long term sustainability.
As always I am pleased to hear your views and comments on the postings, and to take questions about corporate reporting.
David
Well I never thought that I would be drawn to read part of a report published in accordance with the Statutory Auditors (Transparency) Instrument 2008 but the article by John McFall and Richard Sexton that you refer to is well worth a read.
In my current role at CIMA, I can readily associate with the aspects of the article that refer to the future of corporate reporting and particularly agree with the comments on the need to align management information and external reporting. Information presented in corporate reports should represent the top slice of management information regularly reported to the Board.
The comments on the future of auditing were also thought provoking - I accept that we need to move away from any remaining box-ticking mentality but it will be difficult to debate a broadening of the role of the audit without it being seen by sceptics as an attempt to increase fees.
What is clear to me is that all participants in the financial reporting supply chain - regulators, preparers, auditors, investors and other users of corporate reports have an important role to play in restoring public trust and confidence into the system.
Posted by: Nick Topazio, Chartered Institute of Management Accountants | 22 October 2009 at 11:53