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September 17, 2012

Investors call for more reliable audits and disclosure: PwC

At a time of market uncertainty and financial
crisis investors and analysts are calling for improved auditor
reporting and ask for increased transparency and disclosure,
according to a global research by PwC.

PwC’s report ‘Assurance today and
tomorrow’
shows that investment professionals are concerned
about the aggressiveness of companies’ financial statements, i.e.
how management approaches judgement and accounting policies in its
reporting.

“It would be very helpful to know where people
push the boundaries. If all companies could be ranked in terms of
aggressiveness or conservative accounting policies, as judged by
their auditors, that would be helpful information,” an investor
interviewed for PwC’s research said.

Investors, however, have acknowledged the
difficulties of introducing a benchmark to measure companies in
such aggressive practices.

PwC deputy global assurance leader Richard
Sexton remarked that investors have strong views about the future
direction of reporting and stressed that there is a risk involved
in ignoring those views.

Nonetheless Sexton said that the investors’
stance need to be put alongside other stakeholders’ positions to
see what is possible.

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“Any solution will need to balance carefully
the standardisation that rules create with the flexibility that
companies need in order to express themselves,” Sexton
commented.

The survey also found that 43% of investors
surveyed did not always read the opinions on companies that they
follow.

“The only time I would ever read audit
opinions is if there’s something contentious in it. They are very
few and far between,” one of the surveyed investors told PwC.

Audit committee
independence

According to PwC’s report some investors are
wary of the independence of audit committees. Over a third, 
39%, of the professionals interviewed by PwC disagree or strongly
disagree with the idea that audit committees are sufficiently
independent.

“Auditors should focus more on serving
investors than audit clients,” one the participants told PwC.

PwC said few survey participants had direct
access to audit committee members.

“This creates uncertainty in their minds about
the role of audit committees act as an independent check on
management and are effective in overseeing the audit on behalf of
shareholders,” PwC said in the report.

However, some 26% of the investors surveyed
agreed or strongly agreed that audit committees were sufficiently
independent of management while 35% remained neutral.

PwC’s conducted interviews with 104 investors
and analysts in 11 countries allocated in four regions:
Asia-Pacific, North America, emerging markets regions and
Europe.

Rleated link


PwC’s report Assurance today and tomorrow’

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