Shareholders and the Australian public believe a range of parties have contributed to corporate collapses in Australia. However, company boards and chief executives carry the bulk of the responsibility, according to survey results released today by CPA Australia, the country's largest finance and accounting body.
The survey explored the factors impacting on confidence in corporate reporting in Australia. Questions were put to the public, shareholders, analysts, auditors, members of company boards and senior management.
CPA Australia CEO, Mr Greg Larsen, said the survey results are relevant to all Australians. 'Corporate reporting and capital markets are increasingly important to all Australians as we save for our retirement or raise capital for business. Confidence in the markets is essential to their effective operation.'
Survey highlights: Confidence drops in share markets, but not so much in Australia
The survey revealed that recent corporate collapses have contributed to marked declines in public and shareholder confidence in local and international share markets. However the lack of confidence in overseas markets is more widespread than for Australia.
According to Mr Larsen, the vast majority of Australian companies, their auditors and advisors act ethically and fulfil their responsibilities with due regard for stakeholders.
'CPA Australia believes that Australia's current corporate reporting framework that continues to be at the forefront of world's best practice,' said Mr Larsen.
Corporate collapses who's responsible?
The survey also debunked the view that any one function had failed investors and broader public.
'Clearly the public, shareholders and analysts are of the view that we need to consider corporate reporting from a broad perspective one that includes all participants, from company boards and management to the staff who prepare corporate information, and the auditors both internal and external who validate it,' said Mr Larsen.
Of particular note were analysts responses with the Board, CEO and CFO perceived to be responsible to a 'great degree' by more than 73 per cent of those surveyed.
'This clearly supports the importance of addressing the accountability of those responsible for the corporate governance policies and practices of companies.'
Financial reports just a piece of advertising?
The survey revealed:
only 1 in 5 people read financial reports in detail, with the majority scanning the reports;
only 11 per cent of respondents believe the users of financial reports would 'not be at all confident in them';
nearly two-thirds of analysts believed users could be quite confident.
'Given that analysts review a range of financial reports their confidence is an endorsement of the vast majority of companies that fulfil their reporting and disclosure responsibilities,' said Mr Larsen.
There was a marked variation in the perceived value of corporate reports, with more than half of shareholders and nearly two-thirds of the public believing financial reports are just another piece of company advertising. Nearly two-thirds of shareholders and nearly three-quarters of the public believe financial reports are too complex to be useful.
However Mr Larsen warned that regardless of these emerging possibilities there is an obligation on investors to take steps to inform themselves.
The invisible champion of the public interest
The public, profession and industry respondents consistently failed to nominate a body or regulator responsible for protecting the public interest with respect to the share market. The result supports CPA Australia's calls for a more simple and transparent framework.
Mr Larsen suggested the oversight body proposed in CLERP 9 would fulfil this responsibility by more effectively integrating the public interest into the ongoing operations of the corporate reporting framework.
'We look to business and their auditors to toe the line, but we also need to ensure that the rules they must abide by are consistent with public expectations,' he said.
Qualifications enhance confidence
Companies can enhance confidence in their business by ensuring key members of the Board, senior management and external auditors hold a professional accounting qualification. Shareholders and analysts agreed that a professional accounting qualification such as the CPA designation enhanced their confidence in the company and especially where the designation is held by individuals in the roles of CFO (public: 81 per cent, shareholders: 81- 82 per cent, and analysts 75 per cent), Chair of the Audit Committee (public: 74 per cent, shareholders: 75 per cent, and analysts 72 per cent) and external auditor (public: 79 per cent, shareholders: 79-82 per cent, and analysts 82 per cent).
Around two-thirds of respondents from all groups surveyed, believed at least one member of the Board should hold a recognised professional accounting qualification from an accounting body such as CPA Australia.
'It makes sense that in a market where almost anyone can lead a company, investors and other stakeholders are looking for an indication that their senior management and board have and can access the right mix of skills and expertise to guide business decision making,' said Mr Larsen.
CPA Australia is one of the world's largest accounting bodies, representing 97,000 finance, accounting and business professionals in Australia, Asia and Europe.
