One of this month’s most read articles on The Accountant website relates to the lack of investor trust in company reports, uncovered by a recent study by the Association of Chartered Certified Accountants.. The study found that more than two-thirds of the 300 surveyed investors have lost faith in company reports since the onset of the global financial crisis.The study results were followed by a widely read and thought-provoking blog by ACCA’s head of policy Ian Welch (see page 6) published by The Accountant, raising important questions about investor needs.
It’s alarming to see these statistics and surprising that investor groups aren’t sounding alarm bells if this truly is the case? Why aren’t they actively participating in debates about making financial and corporate reporting as useful and reliable as possible in these volatile times?
As editor of The Accountant’s sister title International Accounting Bulletin I’ve been closely following the European audit reform debate and the UK Competition Commission audit market concentration investigation, which have both sought investors’ views. And, it must be pointed out, the somewhat passive attitude of the investor community in the debates has been raised over and over again.Perhaps it’s mainly up to auditors and the evolution of the auditor report to rebuild investor trust.
However investor groups need to be an active participant in those debates and clearly express their needs.
With public opinion and trust in financial information, financial institutions and large corporations at record lows following the financial crisis, investors need to be confident in the information provided to them by corporate reports.
If there is a better and more reliable way of reporting all the relevant information, ranging from financials and remuneration to corporate social responsibility, investors and stakeholders should sit down together to discuss new ways.
Perhaps the solution doesn’t lie in 140 character tweets, but in this fast-paced and information cluttered world, de-cluttering is essential and corporates and investors need to work on ensuring the information provided is relevant.
And auditors and the accounting profession should be encouraged to think of ways to restore investor trust and work on the evolving needs of financial reporting. However, while the accounting profession and its numerous professional bodies and standard-setters are keeping an eye on these issues, investors and their peer groups need to work more proactively with the accounting profession.
Personally, I think it’s key to see investor confidence in company reports improve in order to restore global markets to health and improve public perception.