I was, for almost a decade from about 2001, a contributing editor of AccountingWEB, which is a website focussed on addressing the professional needs of professional accountants outside the very largest firms. I am therefore pleased to be back on its today with an article on the future of audit, on which issue the government is consulting and on what I am doing a lot of work right now. The article is headed:
The government says that audit must be about what it calls public interest entities (PIEs) in the future, but has then said in its White Paper that accounts should remain focussed on delivering information for the benefit of shareholders who need it for use in investment decision making.
This makes no sense. First, that's because PIEs include things like charities and universities and they have no shareholders and no investors in most cases.
Second, it makes no sense because they also include large private companies in the definition of PIEs and they are not allowed to have traded shares.
In that case either the definition of a PIE is wrong, or the White Paper's focus is wrong, because right now the two are incompatible. There is more here.
This is likely to be the first in a series.
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Hi Richard
Surely the accounts are primarily for owners and managers, to enable them to plan and to measure the results of their actions? Audits are surely for external audiences from the banks through the tax authorities to potential investors, basically to verify the arithmetic? Or am I just being naive?
BTW, thanks for the book. Going to read it tonight.
Even the accounting profession does not think that is what published accounts are for
They think they are for decision-making purposes
Except they have now extended the definition of a public interest entity (PIE) to include a whole load of non-corporate entities
They have not had the courage to say it but it seems that they now think that accpoot8ing is about much more than you suggest
I think it was 2016, when I was informed by a well placed source that a large outsourcing provider published 2 sets of annual forecasts. An optimistic one for the shareholders and a pessimistic one for the employees to justify a 1% pay increase.
The producers apparently forgot that some of the employees were shareholders as well.