Companies around the world need to change the way they report financial information to investors so capital markets and economies can function more efficiently, the six largest international accounting firms said.
The firms touted the benefits of a "brave new world" in financial reporting in a 24-page report that was released yesterday. They proposed a single set of global standards that would be easier for regulators in any country to enforce, as well as the more timely and meaningful release of corporate data, some of them non-financial, to investors.
"Consistency in business reporting standards, audit standards and enforcement of audit standards is necessary to support a global economy with the lowest cost of capital," the chief executive officers of PricewaterhouseCoopers LLP, KPMG International, Deloitte Touche LLP, Ernst & Young LLP, Grant Thornton LLP and BDO International said in the report.
Investor confidence in auditors was shattered after Arthur Andersen LLP was implicated in Enron Corp's 2001 collapse and WorldCom Inc went bankrupt in an US$11 billion accounting fraud. The auditing process in the US now is overseen by the Public Company Accounting Oversight Board, a federal body created by the Sarbanes-Oxley Act of 2002.
While the accounting profession has made "significant strides" since the law was passed, "we can't rest simply on Sarbanes-Oxley or the changes we've made so far," Edward Nusbaum, CEO of Chicago-based Grant Thornton, said in an interview.
"We have a responsibility, and we need to step up to the plate and speak out on the issues that impact accounting and financial reporting and capital markets," he said.
In the short term, the firms said in the report that they want to speed up the development of a single set of international accounting standards. Ultimately, those rules should allow for the disclosure of more non-financial information to investors, the firms said.
The report suggested that a retailer reporting strong earnings growth might also want to inform investors that it's failing to attract repeat customers. In another example, the report said investors might value differently a company reporting flat sales if they knew more about its pending patents.
"Investors want professional judgment to be fully exercised," the report said. "This is not possible in an environment under a set of accounting rules that risk turning auditors and financial management into `box checkers.'"
The Financial Accounting Standards Board, the Norwalk, Connecticut-based organization that writes US accounting rules, and its European counterpart are working on a single set of standards for the profession.
"We are making progress on convergence," FASB spokesman Gerard Carney said.
When it comes to uncovering fraud, auditing firms face "barriers" including the "expectations gap" between what investors demand and what can be done at reasonable cost, according to the report. Some laws and regulators even inhibit companies from making disclosure more useful, the firms said.
One possibility the report raised is letting investors or board members decide the intensity, and thus cost, of forensic audits that may stand a better change of finding fraud.
The report also proposed that regulators penalize individuals for faulty audits, rather than entire firms. Arthur Andersen collapsed after it was charged with obstruction of justice for shredding documents at Enron.
The accounting firms said they plan to hold a series of discussions with corporate officials, regulators and investors to elicit their views.
The government is aiming to recruit 1,096 foreign English teachers and teaching assistants this year, the Ministry of Education said yesterday. The foreign teachers would work closely with elementary and junior-high instructors to create and teach courses, ministry official Tsai Yi-ching (蔡宜靜) said. Together, they would create an immersive language environment, helping to motivate students while enhancing the skills of local teachers, she said. The ministry has since 2021 been recruiting foreign teachers through the Taiwan Foreign English Teacher Program, which offers placement, salary, housing and other benefits to eligible foreign teachers. Two centers serving northern and southern Taiwan assist in recruiting and training
WIDE NET: Health officials said they are considering all possibilities, such as bongkrekic acid, while the city mayor said they have not ruled out the possibility of a malicious act of poisoning Two people who dined at a restaurant in Taipei’s Far Eastern Department Store Xinyi A13 last week have died, while four are in intensive care, the Taipei Department of Health said yesterday. All of the outlets of Malaysian vegetarian restaurant franchise Polam Kopitiam have been ordered to close pending an investigation after 11 people became ill due to suspected food poisoning, city officials told a news conference in Taipei. The first fatality, a 39-year-old man who ate at the restaurant on Friday last week, died of kidney failure two days later at the city’s Mackay Memorial Hospital. A 66-year-old man who dined
‘CARRIER KILLERS’: The Tuo Chiang-class corvettes’ stealth capability means they have a radar cross-section as small as the size of a fishing boat, an analyst said President Tsai Ing-wen (蔡英文) yesterday presided over a ceremony at Yilan County’s Suao Harbor (蘇澳港), where the navy took delivery of two indigenous Tuo Chiang-class corvettes. The corvettes, An Chiang (安江) and Wan Chiang (萬江), along with the introduction of the coast guard’s third and fourth 4,000-tonne cutters earlier this month, are a testament to Taiwan’s shipbuilding capability and signify the nation’s resolve to defend democracy and freedom, Tsai said. The vessels are also the last two of six Tuo Chiang-class corvettes ordered from Lungteh Shipbuilding Co (龍德造船) by the navy, Tsai said. The first Tuo Chiang-class vessel delivered was Ta Chiang (塔江)
EYE ON STRAIT: The US spending bill ‘doubles security cooperation funding for Taiwan,’ while also seeking to counter the influence of China US President Joe Biden on Saturday signed into law a US$1.2 trillion spending package that includes US$300 million in foreign military financing to Taiwan, as well as funding for Taipei-Washington cooperative projects. The US Congress early on Saturday overwhelmingly passed the Further Consolidated Appropriations Act 2024 to avoid a partial shutdown and fund the government through September for a fiscal year that began six months ago. Under the package, the Defense Appropriations Act would provide a US$27 billion increase from the previous fiscal year to fund “critical national defense efforts, including countering the PRC [People’s Republic of China],” according to a summary