I went to the launch of a book I have contributed a chapter to last night. This is the book.
My chapter is on country-by-country reporting and the hunt for missing data on where tax is paid.
Towards the close of the discussion, which took place at Middlesex University, I offered a comment. Many present were concerned about trends in data availability. I described what has happened in accounting during my career.
In 1979 all limited companies had to be audited. And all had to file their accounts in full on public record. The content of those accounts was very largely laid down by law. And they had to be true and fair - providing the information that a stakeholder, then widely defined - might need to make a decision on their engagement with a company.
Now the content of many accounts is determined by a company incorporated in Delaware, USA - the International Financial Reporting Standards Foundation.
That company has reduced the range of stakeholders for whom accounts are prepared. They are now only of use to suppliers of capital to a company and then only with regards to their decision as to whether to engage, or not.
True and fair no longer means supplying all material information: it instead means the right boxed have been ticked as to required disclosure, whether it is adequate and meaningful, or not.
Well over 90% of companies are not audited.
Those same companies that are not audited can supply almost meaningless data on public record that supplies almost no useful data to anyone.
The availability of data on the UK's corporate sector has crashed as it has become ever more significant. This is the private sector determining what the public may know about itself. Accountability has been gutted as a result.
This is why I am promoting the Corporate Accountability Network. The discussion was on what data might be like in twenty years time. I suggested that in the case of accounts unless radical action was taken soon the answer would be that we would have almost no meaningful data at all.
This is a world we literally cannot afford.
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Richard
I am a CA who spent c30 years involved in the audit of what we now refer to as ‘small’ companies (turnover <£10m etc), but who made a move away from the profession into industry after the latest threshold increase.
From my experience, it is not audit exemption that is resulting in the lack of useful and reliable data being placed on public record.
The vast majority of private companies taking advantage of audit exemption still utilise the expertise of a professional firm to prepare and file their year end accounts. Most of these firms will require sight of supporting information with respect to the most material figures and disclosures in order to give them comfort that they are not associated with the filing of misleading information. This is a professional responsibility. Clearly there will be outliers – those companies who deliberately take advantage of audit exemption to knowingly file wrong information. However, I am not convinced that this is the problem you are looking at here.
The bigger issue is the replacement of abbreviated accounts (of which I was never a fan – particularly as the small company threshold crept up) with the muddle of micro-entity accounts (a travesty of accounting theory in themselves), abridged accounts, filleted accounts etc. Few understand the new regime sufficiently to assess whether any given company's disclosures are compliant. For anyone trying to assess individual companies' credit worthiness or compare different companies across a sector the data is now a dog's breakfast. This is not to do with audit exemption, IFRS or FRS102 (or the EU!). The blame lies entirely with the UK government.
But in this case we have been dragged down to EU standards
It is na issue as well
But I agree with all you say – and they are targets too
Quis custodiet ipsos custodes? EY and Kaloti, Thomas Cook, Danske Bank? Questions to answer but to whom? Are they just an anomaly? Carillion, Patisserie Valerie, BHS would suggest not. When David Dunckley (Grant Thornton) can tell MPs that it was not his firm’s job to uncover fraud it raises yet another question who’s job is it? The Police/HMRC would appear to be denied resources and the government is reluctant to turn its gaze onto the subject. What is the relationship (if any) between tolerating/conniving with tax avoidance and tolerating money laundering? Nor can we turn to the banks to assist remember HSBC and the Mexican drug cartel, Barclays mis-selling rate swap derivatives, or the wholesale greed fest around Libor rate fixing.
I hope your hard work helps Richard but are you optimistic?
I am optimistic
Initial feedback – which I cannot yet disclose – is positive
Not only did they have to be true and fair but they also had to be prudent which meant exaggerated premises had to be weeded out. That seems to me to be missing now and where ever possible accounts are prepared to give over optimistic assessments of a company’s standing.
Prudence was retired in 2005 with International Financial Reporting Standards
Hmmmm….
“….a company incorporated in Delaware, USA – the International Financial Reporting Standards Foundation.”
Delaware. The US onshore tax haven state. That doesn’t inspire much confidence. 🙁
Indeed