High-quality business reporting lies at the heart of strong capital markets and sustainable economic growth. All those involved in the business reporting supply chain play a critical role in making business reports more relevant, understandable, and reliable. This will enable the various stakeholders who use those reports to make informed decisions with respect to an organization’s social, environmental, and economic performance.

Elemental changes to the current format of financial reporting need to be made to increase its relevance and stakeholder value and stem the increasing complexity that has plagued financial reporting in recent years, according to key business leaders from around the world interviewed by the International Federation of Accountants (IFAC). Developing a new form of reporting that integrates an organization’s social and environmental performance with its economic performance, in a simplified manner, would benefit all stakeholders, according to interviewees. These and other recommendations are summarized in the report, Integrating the Business Reporting Supply Chain, released today by IFAC.

The report is based on IFAC’s interviews with 25 prominent business leaders, representing preparers, directors, auditors, standard setters, regulators, and investors, on what should be done to effectively improve governance, the financial reporting process, the audit, and the usefulness of business reports in the aftermath of the financial crisis. The report provides a summary of interviewees’ recommendations in each area and highlights some of IFAC’s related initiatives.

“Society needs successful commercial organizations that act responsibly, and it is important that the business reporting system not only allows but actively promotes this corporate philosophy. There is much debate as to whether or not the current reporting system is fit for this purpose, and this report seeks to drive forward the debate in the crucial areas: governance, financial reporting, financial auditing, and the usefulness of business reports,” said Charles Tilley, chair of the IFAC Business Reporting Project Group.

Strong governance lies at the core of high-quality business reporting. Interviewees agreed that good governance starts with tone at the top. Additional recommendations to strengthen governance in organizations include:

• Governance codes should be principles based and stakeholder driven;
• Collaborative, global effort is required to address systemic risk; and
• More independence should be required of boards of directors.

Improving financial reporting depends on simplifying reports, so that they are easily understood by all stakeholders in the reporting supply chain, according to interviewees. Interviewees also called upon regulators and standard setters to limit the financial reporting burden on smaller and non-listed entities.

In the area of auditing, interviewees agreed that limited audit choice is a challenge that needs to be addressed. They also made recommendations to further improve practice development and auditor communication, and recommended that auditors expand the scope of their assurance services to include non-financial information, such as the social and sustainable performance information included in integrated business reports.

Interviewees acknowledged that achieving integrated business reporting will be very hard to accomplish, and will require all stakeholders in the business reporting supply chain to manage the challenges—including litigation risks and regulations that may inhibit change—in a coordinated way.

IFAC would like to thank all of the business leaders who agreed to be interviewed, graciously lending their time and expertise, and without whom this project would not have been possible. To access a summary of the key recommendations, the interview transcripts, and a series of articles based on the interviews, visit the IFAC website. More information about the project group and their previous work is also available on this site.

About IFAC
IFAC (www.ifac.org) is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 164 members and associates in 125 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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Key findings from the IFAC 2010 Fourth Annual Global Leadership Survey cover a range of topics including IFAC's role in implementation of global standards, transitioning to ISAs, sustainability, ethics, the needs of SMEs and SMPs, credibility of the profession, and the demand for professional accountants.

Profession Urges International Federation of Accountants to Increase Role in These Areas

Credibility of the profession, standard setting, and adoption and implementation are key areas of focus for leaders in the accountancy profession, according to results of the 2010 IFAC Global Leadership Survey of the Accounting Profession, released today by the International Federation of Accountants (IFAC), the global organization for the accountancy profession with members and associates in 125 countries.

“In our fourth annual survey, there was extremely strong confirmation among survey participants that IFAC should continue in its pivotal role as an international standard setter,” said Ian Ball, chief executive officer of IFAC. “In addition, respondents asked us to continue to work toward convergence and the adoption of international standards, and proactively support and restore public confidence in the accountancy profession.”

IFAC’s Role in Implementation of Global Standards is Crucial
The accountancy profession feels that transitioning to International Standards on Auditing (ISAs) is a crucial issue—96 percent of survey respondents cited this as very important or important, compared with 83 percent last year. There was also universal sentiment that IFAC, as a representative of the global accountancy profession, has a key role to play in convergence and leading the way in the global adoption and implementation of standards.

Virtually all survey participants (98-99 percent) said that IFAC plays a very important or important role relating to confidence in, and adoption of, high-quality international standards. In addition, 97 percent of respondents said that recognition of IFAC as the umbrella organization for international standards in the areas of auditing and assurance, education, ethics, and public sector financial reporting is very important or important. The vast majority of survey participants said IFAC should continue to work toward convergence and effective implementation of international standards. To encourage implementation, 91 percent of those surveyed said that developing guidance regarding international standards and corporate governance principles is very important or important.

Sustainability and SMPs Take Center Stage
Sustainability emerged as a key issue as well, with 91 percent saying that progressing corporate social responsibility, including sustainability, is important, compared to 82 percent last year. In addition, 95 percent of respondents said that addressing the needs of SMEs and SMPs is crucial.

Global Code of Ethics Needed
The importance of ethics also was cited—auditor independence and agreeing/discussing expectations to prevent and detect fraud were cited by 91 percent and 89 percent of respondents, respectively. The survey also confirmed the widespread opinion that there is a clear need to have a global code of ethics to protect the fundamental qualities of the profession, particularly relating to independence. According to participants, the code needs to take local culture into account, and needs to be effectively enforced.

Demand for Professional Accountants Continues to Grow
Significant demand is seen across various sectors, particularly in public practice, with approximately three-quarters of respondents saying that demand is very high or high in public practice-accounting/advisory/tax/other (78 percent) and public practice-auditing/assurance (71 percent). These results compare positively to our 2009 survey, in which 77 percent and 65 percent, respectively, of respondents cited very high or high demand in these areas. Those surveyed said that the accountancy profession continues to be attractive due to career options, ability to work internationally, and earning potential.

About the Survey
The 2010 IFAC Global Leadership Survey on the Accountancy Profession asked officers (generally presidents and chief executive officers) from IFAC’s member bodies, associates, affiliates, and regional accountancy organizations and groupings a variety of questions regarding the accountancy profession. Survey results include data from 123 respondents who took the survey from January 10, 2011 to February 15, 2011.

About IFAC
IFAC (www.ifac.org) is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 164 members and associates in 125 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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