In this paper, we have concentrated on the audit of static, periodic IFR. Some companies have moved beyond the reporting of static, periodic accounting data to providing more timely access to corporate data that is statutorily required
Insert about here.
In 1999 the Scottish Accounting Institute issued a paper entitled ‘Business Reporting - An Inevitable Change?’ (ICAS 1999) which outlined a proposed development path for business reporting in the UK, and beyond. This paper forms part of their ‘Making Corporate Reports Valuable’ series, and is complemented by a number of other studies performed by the Institute in this area.
In this paper the authors outlined a reporting environment in which business reporting would be undertaken via providing access to a corporate database of reporting information. Whilst this database would not be the full dataset available internally to the business it would provide much greater depth than is currently available in the traditional reporting model.
Some discussion of the assurance implications of this proposal was offered. Specifically, the report outlined the need to move away from the assurance of outputs to address assurance of processes. It suggested there would be an ongoing need for this verification, but the database approach would significantly reduce the value of an outputs based examination. The report also highlighted the possibility that differing assurance levels and forms may need to be introduced to deal with the differing levels and forms of information provision available via the database.
The report concluded by outlining a number of key areas in which further research is needed to confirm the validity of these suggestions for a very different approach to business reporting. Those offered that could be considered to have at least some audit implications include:
the call for greater understanding of non-financial indicators and their verification, such as the development and use of intangible assets and assessments of the quality of management,
the extent and nature of the demand for related assurance services, such as the reliability of systems, reliability of specific data and the relevance of overall information to specific decisions.
development of relevant assurance procedures and reporting formats, such as online auditing systems and the way in which assurance is to be communicated.
examination of the skills base of professional accountancy firms - what will the structure and dynamics of the market for independent assurance services be as it evolves and will these services be offered by professional accounting firms, or by other professionals?
This paper addresses the changing environment in which external audit is conducted resulting from the use of electronic means of reporting by corporations. Its primary focus is on the use of the Internet as the most established electronic communications tool for reporting at present, although the implications of changed reporting patterns are applicable to a wider range of electronic communications media.
The paper then examined the existing pronouncements related to the audit function from numerous professional bodies. It looked initially at the statements made by bodies who were commenting more widely than solely on audit implications and then examined the positions of the auditing standard setters in the USA, Australia and the UK at the time of writing this paper.
It is clear from this analysis that, although many of the general, procedural issues related to the external audit of online financial information are being addressed by these standard setting bodies, the wider implications of the impact on the audit function have not yet been addressed in detail. The recent change in the legislative environment in the UK at least will require these bodies to continue to consider these wider issues and to eventually issue further guidance on this area.
We argue that the professional responses to IFR are an inadequate response to the technological developments. We do not argue, as some in the profession do, that we should replicate the paper-based environment in electronic form by, for example, providing Adobe Acrobat versions of printed documents. To the contrary we argue that the global accounting and audit community has a public responsibility to promulgate the most effective and efficient distribution of accounting data via the Web.
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Table 1 – Attributes of financial reporting websites of five countries as at end 2001 (based on Allam & Lymer 2002, table 3, p10)
Cash Flow Statement
Notes to Accounts
Table 2: Comparison of percentages of top 50 (Allam) or top 30 (IASC) companies in geographic domains who provide key elements of an annual report on their Website for accounting periods ending to end 2001 (Allam) or mid 1999 (IASC)
Source: from Table 3 Allam & Lymer, 2002 p10 and Table 6 in IASC 1999 p55