The Prince’s Accounting for Sustainability Forum held in London just before Christmas drew over 200 business, community, investor and professional accounting leaders from around the globe. I represented the Institute at this event, along with our technical expert, Geraldine Magarey, Manager Sustainability and Regional Australia.
Held at St James’s Palace State Apartments, HRH the Prince of Wales and the UK Chancellor of the Exchequer, George Osborne MP, spoke passionately about how the global economy needs to evolve to meet the challenges of the sustainability revolution. The future is uncertain and people are judged, remunerated and recognised largely by what they achieve today rather than tomorrow.
How we plan and provide for the future will determine our ultimate success and, indeed, survival.
One thing is clear – there is still an urgent need for businesses to put a value on and better account for the social and environmental impacts of their operations.
Now some of you may say this appears to be a re-run of the ‘Triple Bottom Line’ reporting which has been around for some years, but this is not the case. The focus of the forum was to highlight the emergence of ‘Integrated Reporting’ – an enhanced reporting mechanism increasingly used by businesses to better meet the information needs of stakeholders.
Smart businesses are already well ahead of their competitors with integrated reporting – this is not only for the future, but for now!
I’ve expanded further on the topic of Integrated Reporting in my regular Dealbook column on AFR.com.
Wednesday, January 12, 2011
Tuesday, December 14, 2010
Responding the European Commission review on the role of audit
The aftermath of the global financial crisis (GFC) has given rise to a flurry of activity among regulators, governments and policy makers around the world.
In Europe, the audit profession, in particular, is under heightened scrutiny. There is an unprecedented wave of consultations and calls for submissions from government officials and regulators.
In November this year, both Andrew Stringer (Head of Audit) and I were invited to give evidence to a select committee of the UK House of Lords on the topic of audit. As the only non-UK body, we presented the Australian perspective of what might have gone wrong in the banking crisis that hit the UK.
More recently, the European Commission came out with a Green Paper Audit Policy: Lessons from the Crisis on 13 October 2010.
This paper questions the role of audit and how audit function might be enhanced to contribute to financial stability. This week, the Institute responded to the Green Paper, supporting policy changes that clearly lead to improvements of overall audit quality.
In the submission, we acknowledge that it is likely that the European audit profession will see future enhancements in policies in light of the banking crisis that plagued Europe. Our encouragement to European authorities is to use our analyses and experience to influence the development of well considered and innovative improvements before launching into substantial and broad legislation.
Fortunately for us, Australia was at the periphery of the banking crisis and the impact was limited to disruptions to the global funding markets. Given the global nature of the audit profession, it is timely and important to present the Australian perspective of having the robust systems in place that brought us through successfully. Audit should have a key role in ensuring the proper financial governance and strength of companies. This, in turn, improves general market sentiment and overall investor confidence.
If there is to be international regulatory reform, it is important that a comprehensive debate is had, that the focus is on improving the quality and value of audits to meet the demands that have arisen following the financial crisis.
Any reform to audit policy should not be driven by the fear that still reverberates around the global financial crisis, or even worse, merely for the sake of change.
In Europe, the audit profession, in particular, is under heightened scrutiny. There is an unprecedented wave of consultations and calls for submissions from government officials and regulators.
In November this year, both Andrew Stringer (Head of Audit) and I were invited to give evidence to a select committee of the UK House of Lords on the topic of audit. As the only non-UK body, we presented the Australian perspective of what might have gone wrong in the banking crisis that hit the UK.
More recently, the European Commission came out with a Green Paper Audit Policy: Lessons from the Crisis on 13 October 2010.
This paper questions the role of audit and how audit function might be enhanced to contribute to financial stability. This week, the Institute responded to the Green Paper, supporting policy changes that clearly lead to improvements of overall audit quality.
In the submission, we acknowledge that it is likely that the European audit profession will see future enhancements in policies in light of the banking crisis that plagued Europe. Our encouragement to European authorities is to use our analyses and experience to influence the development of well considered and innovative improvements before launching into substantial and broad legislation.
Fortunately for us, Australia was at the periphery of the banking crisis and the impact was limited to disruptions to the global funding markets. Given the global nature of the audit profession, it is timely and important to present the Australian perspective of having the robust systems in place that brought us through successfully. Audit should have a key role in ensuring the proper financial governance and strength of companies. This, in turn, improves general market sentiment and overall investor confidence.
If there is to be international regulatory reform, it is important that a comprehensive debate is had, that the focus is on improving the quality and value of audits to meet the demands that have arisen following the financial crisis.
Any reform to audit policy should not be driven by the fear that still reverberates around the global financial crisis, or even worse, merely for the sake of change.
Tuesday, November 30, 2010
The Framework for managing audit quality sustainability
At the Institute we recognise that for audit practitioners in 2010 there are considerable challenges to ensure audit quality is not only maintained, but also improved. We are committed to helping our members to meet these challenges through continued education and training and sharing of peer experiences. All of this helps to contribute to continued high audit standards.
We recognise that it is essential that Australia maintains a healthy and focused audit community.
As part of our commitment to members, I am pleased to present to you a practical working tool for members practicing audit entitled Framework for managing audit quality sustainability.
The framework is a follow-up to our 2009 publication entitled Guide to audit quality – benefit of audit and defines the key components needed to manage a sustainable audit process.
The framework is a first as it is designed to be used by practitioners in large or small practices and publicly defines the components needed to manage a sustainable audit process in a ‘clear, precise and consistent manner.’
I trust that you will find the Framework for managing audit quality sustainability useful in your next audit and look forward to receiving your feedback.
If you have any questions or feedback regarding the framework, please contact me on 02 9290 5598 or alternatively at lee.white@charteredaccountants.com.au.
We recognise that it is essential that Australia maintains a healthy and focused audit community.
As part of our commitment to members, I am pleased to present to you a practical working tool for members practicing audit entitled Framework for managing audit quality sustainability.
The framework is a follow-up to our 2009 publication entitled Guide to audit quality – benefit of audit and defines the key components needed to manage a sustainable audit process.
The framework is a first as it is designed to be used by practitioners in large or small practices and publicly defines the components needed to manage a sustainable audit process in a ‘clear, precise and consistent manner.’
I trust that you will find the Framework for managing audit quality sustainability useful in your next audit and look forward to receiving your feedback.
If you have any questions or feedback regarding the framework, please contact me on 02 9290 5598 or alternatively at lee.white@charteredaccountants.com.au.
Friday, November 5, 2010
The changing role of the CFO
It seems to me that our profession continues to evolve at a fairly rapid rate.
One role that’s changed dramatically over the years is that of the CFO. Once, the CFO was someone who primarily focused on the financial position of an organisation.
Today’s CFO, I’m delighted to say, is a dynamic member of the management team. Part visionary, part strategist. And only part accountant, in a conventional sense.
There’s no doubt the broader role a good CFO does play in today’s organisations. As money and financial instruments become more and more complex, effecting the wellbeing of the business, so too has an understanding of the numbers. It’s not surprising that the accounting professional is being invited to share their leadership, vision, and general management skills.
Of course, with increased responsibility comes increased risk. While the average CFO salary is 30-60% higher than controller salaries, according to Robert Hall International, their longevity in the role can be short-lived. According to a report in Fortune Magazine in 2009, almost 25% of CFO positions in the Fortune 1000 changed over in one 12 month period. For small businesses, the position turns over every 2-3 years.
So, today’s CFOs must be well prepared. There’s no time to settle in or learn on the job - they really do have to hit the ground running.
As well as a solid understanding of the accounting principles, strong technical and operational skills, a CFO must demonstrate leadership skills and a passion for the business. In fact, what makes a really good CFO may not even be in the job description.
It really is fascinating to see how the role has developed over the years. I must say, I’m looking forward to chairing a lunch in a few weeks time, where several CFOs will be asked to share their success stories. What were their journeys to the top? What challenges face them today? Where else do they think the role of a CFO will go in the future?
I’d be interested to hear from other CFOs, or budding CFOs, on the challenges facing them. Is the broader role and recognition worth it for the likelihood of a short stay at the top? Add your comments, and let me know.
I’ve no doubt that the role of the CFO will continue to change. As they say, ‘watch this space’!
One role that’s changed dramatically over the years is that of the CFO. Once, the CFO was someone who primarily focused on the financial position of an organisation.
Today’s CFO, I’m delighted to say, is a dynamic member of the management team. Part visionary, part strategist. And only part accountant, in a conventional sense.
There’s no doubt the broader role a good CFO does play in today’s organisations. As money and financial instruments become more and more complex, effecting the wellbeing of the business, so too has an understanding of the numbers. It’s not surprising that the accounting professional is being invited to share their leadership, vision, and general management skills.
Of course, with increased responsibility comes increased risk. While the average CFO salary is 30-60% higher than controller salaries, according to Robert Hall International, their longevity in the role can be short-lived. According to a report in Fortune Magazine in 2009, almost 25% of CFO positions in the Fortune 1000 changed over in one 12 month period. For small businesses, the position turns over every 2-3 years.
So, today’s CFOs must be well prepared. There’s no time to settle in or learn on the job - they really do have to hit the ground running.
As well as a solid understanding of the accounting principles, strong technical and operational skills, a CFO must demonstrate leadership skills and a passion for the business. In fact, what makes a really good CFO may not even be in the job description.
It really is fascinating to see how the role has developed over the years. I must say, I’m looking forward to chairing a lunch in a few weeks time, where several CFOs will be asked to share their success stories. What were their journeys to the top? What challenges face them today? Where else do they think the role of a CFO will go in the future?
I’d be interested to hear from other CFOs, or budding CFOs, on the challenges facing them. Is the broader role and recognition worth it for the likelihood of a short stay at the top? Add your comments, and let me know.
I’ve no doubt that the role of the CFO will continue to change. As they say, ‘watch this space’!
Monday, August 16, 2010
Real time assurance for today's economy
Recently, the Institute has worked with leading academics on a thought leadership paper which aims to raise the profile of an emerging form of assurance practice - called 'Continuous assurance'.
The paper entitled, Continuous Assurance for the Now Economy is intended to stimulate thinking about the issues that need to be addressed in a world where Continuous assurance has become, or aims to become, the standard for both internal and external auditing. The paper examines how the profession must respond so that the vision on IT-enabled real-time auditing is to become a reality.
Continuous assurance - what is it?
Continuous assurance is a concept developed as a result of the 'now economy' which is characterised by 24/7/365 globalised operations, customer interaction and management decision making. Continuous assurance will form an intrinsic component of the now economy by providing key stakeholders with timely and more relevant access to business data, which has a level of assurance placed on it.
Why is it important?
The International standard setter, the International Auditing and Assurance Standards Board (IAASB) has recognised continuous assurance as an emerging methodology which needs to be explored.
Likewise the Institute presented the paper to the Australian Auditing and Assurance Standards Board (AUASB) who recognise the important impact that continuous assurance could potentially have on the profession as a whole, particularly around accounting education, technology, business reporting and the existing skill-set of professional auditors.
What does the paper say?
The paper recommends six practical steps that go some way to delivering the practical application of continuous assurance, including:
I believe that traditional auditing will give way to more progressive and close to the event assurance. It is because of this that we have kick started the continuous assurance debate to create and open up dialogue with key stakeholders.
I would be interested in your thoughts?
The paper entitled, Continuous Assurance for the Now Economy is intended to stimulate thinking about the issues that need to be addressed in a world where Continuous assurance has become, or aims to become, the standard for both internal and external auditing. The paper examines how the profession must respond so that the vision on IT-enabled real-time auditing is to become a reality.
Continuous assurance - what is it?
Continuous assurance is a concept developed as a result of the 'now economy' which is characterised by 24/7/365 globalised operations, customer interaction and management decision making. Continuous assurance will form an intrinsic component of the now economy by providing key stakeholders with timely and more relevant access to business data, which has a level of assurance placed on it.
Why is it important?
The International standard setter, the International Auditing and Assurance Standards Board (IAASB) has recognised continuous assurance as an emerging methodology which needs to be explored.
Likewise the Institute presented the paper to the Australian Auditing and Assurance Standards Board (AUASB) who recognise the important impact that continuous assurance could potentially have on the profession as a whole, particularly around accounting education, technology, business reporting and the existing skill-set of professional auditors.
What does the paper say?
The paper recommends six practical steps that go some way to delivering the practical application of continuous assurance, including:
- Establish priority areas
- Identify monitoring and continuous audit rules
- Determine the process' frequency
- Configure continuous audit parameters
- Follow up
- Communicate results
I believe that traditional auditing will give way to more progressive and close to the event assurance. It is because of this that we have kick started the continuous assurance debate to create and open up dialogue with key stakeholders.
I would be interested in your thoughts?
Monday, June 28, 2010
Essential guidance for 2010 financial year end
As part of the Institute's ongoing analysis of themes impacting preparers, auditors and audit committee's as they perform their financial year end roles and professional responsibilities, we have uncovered three new issues as well as confirmed the continued presence of three existing themes in our latest Essential guidance for the 2009-10 financial year end
Despite improvement in Australia's business conditions, and the country avoiding Europe's sovereign debt risks, the challenges for the June 2010 financial year end reporting period continue to be - determining fair value, impairment of assets and going concern.
Looking forward the Institute anticipates increased fair value movement in financial instruments to continue as well as some reversals of impairments from prior years. An increase in the cost of capital, exchange rate fluctuations and more mergers and acquisitions are expected throughout the rest of 2010.
The continued volatility of the Australian dollar and some commodities place great pressure on corporate risk management and hedging strategies. Liquidity remains tight for businesses, therefore, careful forecasting of short to medium term finance needs is critical, as is clearly understanding the terms and conditions with bankers and financers.
It will be extremely interesting to witness how the Australian economy continues its path out of the global economic downturn and whether it can capitalise on its unique position.
Despite improvement in Australia's business conditions, and the country avoiding Europe's sovereign debt risks, the challenges for the June 2010 financial year end reporting period continue to be - determining fair value, impairment of assets and going concern.
Looking forward the Institute anticipates increased fair value movement in financial instruments to continue as well as some reversals of impairments from prior years. An increase in the cost of capital, exchange rate fluctuations and more mergers and acquisitions are expected throughout the rest of 2010.
The continued volatility of the Australian dollar and some commodities place great pressure on corporate risk management and hedging strategies. Liquidity remains tight for businesses, therefore, careful forecasting of short to medium term finance needs is critical, as is clearly understanding the terms and conditions with bankers and financers.
It will be extremely interesting to witness how the Australian economy continues its path out of the global economic downturn and whether it can capitalise on its unique position.
Tuesday, May 25, 2010
International financial regulation – changes are afoot
The global economic downturn clearly showed that macroeconomic policy and prudential supervision were not sufficient to ward off systemic crisis in the international financial system. So the momentum of change has begun – but the $64,000 question remains – What does this mean for Australia, especially when it moved through the economic downturn with greater success than most Westernised countries? Indeed Australia has been praised for its resilience, so what’s next?
Recently, Professor Ian Harper from Access Economics remarked that Australia was at risk of unnecessary change since it appears that the ‘whole class was being punished because two students were caught smoking’! It is with this thought that the Institute engaged with Prof Harper and Access Economics to identify the main global reforms under consideration and how Australian authorities should respond.
The analysis, entitled Reforming international financial regulation identifies three broad responses which Australia could make to the international reform agenda. These range from fully signing up to the reforms, through redefining Australia’s regulatory responsibilities to better reflect global developments, to explicitly repudiating some of the more interventionist proposals.
I am interested to find out about your opinion and whether you agree. For mine I believe we have an opportunity to re-think Australia’s regulatory framework following the findings of the Wallis Committee in 1996-97. New rules may require a new assignment of functions among Australia’s financial regulators. Through this process we must not lose sight of the overall goal which is to keep the financial system more stable and less prone to crisis.
Recently, Professor Ian Harper from Access Economics remarked that Australia was at risk of unnecessary change since it appears that the ‘whole class was being punished because two students were caught smoking’! It is with this thought that the Institute engaged with Prof Harper and Access Economics to identify the main global reforms under consideration and how Australian authorities should respond.
The analysis, entitled Reforming international financial regulation identifies three broad responses which Australia could make to the international reform agenda. These range from fully signing up to the reforms, through redefining Australia’s regulatory responsibilities to better reflect global developments, to explicitly repudiating some of the more interventionist proposals.
I am interested to find out about your opinion and whether you agree. For mine I believe we have an opportunity to re-think Australia’s regulatory framework following the findings of the Wallis Committee in 1996-97. New rules may require a new assignment of functions among Australia’s financial regulators. Through this process we must not lose sight of the overall goal which is to keep the financial system more stable and less prone to crisis.
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