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Businesses 'lose faith in corporate reporting'

02/07/13

Trust is one of the cornerstones of any successful business. If companies do not have faith in the activities of high ranking employees, there can be a serious problem.

Indeed, there has been an erosion of trust between the public and big business in recent years thanks to a conveyer belt of scandals and it seems this is starting to seep through to investors.

Research by the Association of Chartered Certified Accountants (ACCA) has found 69 per cent of investors are sceptical about company-provided data since the onset of the global financial crisis.

Some 63 per cent think managers have too much discretion when it comes to producing the reports and 46 per cent would back bringing an end to mandatory quarterly reporting.

Integrated reporting -  which shows an organisation's strategy, governance, performance and prospects in one document - is supported by 93 per cent of those questioned.

Ewan Willars, ACCA director of policy, said the results highlight a shift in terms of what investors want from financial reports. "The decline in trust in corporate information since the global financial crisis suggests there is a bigger role for audit to play in rebuilding confidence in company statements," he added.

However, Mr Willars cautioned against developing a one-size-fits-all approach when it comes to investors, as there are different types of investors requiring different levels of information.

"Companies and the finance teams that support them may need to provide a range of financial information that meets the needs of various investment groups, rather than look at the investment community as one," the expert remarked.

Speaking to City AM last month, Mr Willars was adamant the corporate reporting process has to be changed, as investors - justifiably so - want access to information almost instantly.

In order to make sure everyone in the industry is working with the most up-to-date information, he revealed ACCA is completing a four-stage study of the investor community as the group seeks to find the underlying patterns of what drives investors.

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