Companies must improve to regain trust of public, says audit regulator

Companies must improve their corporate reporting in order to regain the public’s trust, a major new report has revealed.

The finding forms part of the Financial Reporting Council’s (FRC) Annual Review of Corporate Reporting 2018/19.

Addressing the report, the FRC has today issued an open letter to all audit committee chairs and finance directors urging them to improve the state of audit and assurance.

“Investors and the general public rightly expect financial reports to be fair, balanced and understandable,” said Paul George, Executive Director of Corporate Governance & Reporting at the FRC.

“This is particularly important in periods of uncertainty where heightened transparency is expected.

“High-quality reporting by companies, including candid disclosure of the risks they face, supports trust in business.”

Reflecting the findings of the annual review, published this week, the FRC added that it expects companies to “improve the quality reporting of forward-looking information, the potential impact of emerging risks on future business strategy, the carrying value of assets and the recognition of liabilities”.

Likewise, investors and stakeholders expect “greater transparency” of the risks to which companies are exposed and the “actions they are taking to mitigate the impact of those uncertainties”.

On a positive note, however, the regulator “welcomes” improvements in key disclosures of critical judgements and estimates and alternative performance measures (APMs).

To access the report, please click here.

For help and advice understanding corporate reporting, please get in touch with our expert team.

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