Vision-Banner-Issue-2-min
News

IAASA has updated its Statement on Scope and Authority of Audit and Assurance Pronouncements, which provides details on the Auditing Framework for Ireland, as adopted by IAASA. It has been updated to reflect the requirements of the Companies Act 2014, as amended by the Companies (Statutory Audits) Act 2018, and IAASA's intention to issue guidance notes to assist auditors in applying the Auditing Framework for Ireland to particular circumstances and industries. The document can be accessed here. Published: 16 May 2019. Source: IAASA.

May 17, 2019
News

The International Ethics Standards Board for Accountants (IESBA) has released an updated Q&A publication to support the adoption and implementation of the revised long association provisions Changes to the Code Addressing Long Association of Personnel with an Audit or Assurance Client. This publication is a revised version of the Staff Q&A publication published in May 2017. It contains additional frequently asked questions and is aligned to the revised and restructured International Code of Ethics for Professional Accountants (including International Independence Standards), issued by the IESBA in April 2018. The Q&A publication is designed to highlight, illustrate, or explain aspects of the revised partner rotation regime in the Code and thereby assist in their proper application. It is intended to assist national standards setters, firms, IFAC member bodies and others as they adopt and/or implement the revised and restructured long association provisions in Part 4A of the Code. Published: 9 May 2019. Source: The International Ethics Standards Board for Accountants (IESBA).

May 16, 2019
News

Korn Ferry’s Global Chief Financial Officers practice surveyed 222 chief financial officers (CFOs) on a variety of topics to understand their perspective on the role and the major business trends that are impacting the finance function. The 2019 CFO Pulse Survey found that, when planning for a successor, only 38% of CFOs believe they have a comprehensive succession plan, and 80% do not feel there is a ready-now successor for their role. "The number of CFOs who don’t feel they have a formal succession plan or a direct report ready to replace them now should raise concern. And yet, despite the lack of perceived readiness, approximately 60% of appointed CFOs are still sourced internally," says Bryan Proctor, senior client partner and Global Financial Officers practice lead at Korn Ferry. "It’s critical for organisations to understand their talent balance sheet, have a pipeline of potential leaders, and develop a thoughtful succession strategy that provides transparency on potential and offers experiences necessary to fully prepare CFO successors." Additionally, the CFO survey respondents reported strategic thinking (26%) and leadership skills (22%) as the top two capability gaps they are looking to develop in their direct reports. "We know from previous Korn Ferry research that becoming a CFO requires successors to not only have a strong financial background, but also strong operational and strategic leadership skills," says Proctor. In response to where CFOs spend their time, driving strategy (32%) topped the list, followed by budgeting and financial planning (16%) and data and business intelligence/analytics (14%). "As CFOs continue to play a larger role in leading their organisation, they need to have a strong finance team to focus on the day-to-day finance activities, which will enable the CFO to focus on ‘what’s next’ and how to best deploy capital to support the strategy," says Proctor. Additionally, the survey found 41% of CFOs said working at a company going through a transformation was the most valuable career experience for developing the skills they have today. "Transformative experiences may not always be pleasant, but they afford the executive the opportunity to further develop key leadership skills, strategic thinking, and learning agility," says Proctor. When it comes to their career path, 65% of CFOs said they want to be a CEO during their career, but nearly one-quarter (23%) said this is the role they want next. "While CFOs remain ambitious, many appreciate that there are still only a few who successfully ascend to CEO directly; last year, it was only 8% of departing CFOs," says Proctor. "Usually there is a stop along the way as a COO or president of the business in order to round out their operational or commercial experience." As expected, the next top desired career move reported was to become a CFO at a larger company (34%). Published: 6 May 2019. Source: Korn Ferry Institute.

May 16, 2019
News

To mark the launch of the European Reporting Lab@EFRAG, a high-level conference on fostering innovation in corporate reporting took place on 5 March in Brussels. The European Commission Vice-President, Valdis Dombrovskis, delivered the keynote speech and Richard Howitt, CEO of the IIRC and former MEP, set the scene for two lively panel discussions among experts. A summary report of the key points discussed and feeback received has been prepared by the EFRAG Secretariat for the convenience of stakeholders. Published: 14 May 2019. Source: European Financial Reporting Advisory Group.

May 16, 2019
News

A new guide to help smaller listed and AIM quoted companies improve their financial reporting has been published by the FRC and ICAEW. The guide addresses issues raised by the FRC about the quality of financial reporting in this sector, and provides practical tips and questions for audit committees to consider, with a view to driving up the quality of smaller quoted company financial reporting. Smaller Listed and AIM Quoted Companies – A Practical Guide for Audit Committees on Improving Financial Reporting offers practical, cost-effective suggestions on how smaller quoted companies can improve the quality of their financial reporting and suggested questions for audit committees to ask themselves and those associated with the financial reporting process, including the board, chief financial officer, finance team and external auditors. These questions are designed to encourage the smaller quoted companies to reflect on current practices and consider areas for improvement. High-quality financial reporting can contribute to a strong and efficient economy by improving transparency and giving investors the ability to assess the financial integrity of a company and hold management to account. However, for many smaller listed and AIM quoted companies, financial reporting is not always seen as a top tier issue. Published: 13 May 2019. Source: Financial Reporting Council.

May 16, 2019
News

Why is management reporting and analysis so deficient in many companies? Peter Gillespie explores why companies are getting this wrong and what they can do to correct it. Companies rarely talk about how they produce their management reporting and analysis (MRA). Just as budgets, monthly accounts and trends in indicators are competitively sensitive and kept strictly confidential (and rightly so), details of how businesses produce the MRA are locked down, too – as if even describing the approach could give an advantage to others. However, I contend that the reason for this silence is that many companies don’t have a structured approach to MRA. It would be embarrassing if outsiders were to find out that a company could not track those numbers reported in the annual accounts throughout the year, or that the information pool is not much deeper or richer than the so-called “minimum requirements” of external reporting; not to mention the real risk of mismanagement. Why aren’t deficiencies in MRA addressed? Boards and auditors often don’t spot deficiencies in MRA. Focusing instead on external reporting, they don’t sufficiently challenge finance on the methodology being used to produce MRA. Furthermore, boards often exhibit arrogance and complacency that they ‘know the business by heart’ and so, see no need in having any more detail or structure. When boards and auditors consider internal controls, they evaluate the existing MRA rather than think about how it could and should change. They overlook the fact that integrating non-financial indicators into segmental reporting and variance analyses is vital to excellent MRA. They may assume that having disparate sales order processing, logistics and payroll systems is good enough. But these cannot of themselves produce the MRA. There are other reasons for the problems with a company’s MRA: accountancy qualifications and training in auditing firms may be weak in this area; little regulatory guidance; or finance departments might not be taking responsibility for cleaning and guaranteeing the quality of information (notably non-financial indicators) coming from other functions. A structured approach to MRA The structured approach to MRA should include: a database approach to storing information once and once only; strategies and procedures for: controlling master data; collecting financial and non-financial data at the same frequency and level of granularity (e.g. by cost centre or product family) across all versions (actuals, budget, plan, etc.); and managing change – to integrate new subsidiaries, change products or services, etc., and to keep the MRA relevant over the long-term. procedures for monthly accounts, budgets, forecasts, etc., synchronised to ensure consistency and relevance in variance analyses; clear documentation of all definitions, processes and calculations of the MRA; staff training; and a project, sponsor, budget and some time for finance to make it happen. The starting point will be the company’s own SWOT analysis. The MRA should reflect the issues underpinning these and comprise of a full set of accounts that is understood by non-accountants for each period, reconciled to statutory accounts where necessary, with variances and trends. This would mean including an income statement with a ‘management’ breakdown of the elements, a balance sheet with friendly headings like ‘working capital’ and ‘net debt’, and a full cash flow statement explaining the change in cash and cash equivalents. It would also need breakdowns of performance by product, service, customer or project, and a detailed profit variance analysis against budget, forecast and prior year. These numbers should be supported by insightful commentaries and trends in key indicators over time. The benefits of MRA A structured MRA should produce a significant reduction in re-keying and reconciling data, increased accuracy and reliability and if the board can manage it, better decision making. If that’s not worth the effort for every organisation, I don’t know what is. Peter Gillespie FCA is the Director of Meaningful Metrics.

May 13, 2019