Australian CFOs concerned about effectiveness of corporate reporting

Friday 11 March 2016

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Australian CFOs are losing confidence in corporate reporting and its effectiveness, as pressure from audit committees, the complexity of implementing new reporting requirements and reporting overload affect performance, according to the annual survey by EY’s Financial Accounting and Advisory Services (FAAS), Are you prepared for corporate reporting’s perfect storm?

EY’s global survey of 1,000 CFOs in organisations with revenue greater than US$500m across 25 countries, including Australia, found CFOs’ confidence across all aspects of corporate reporting had fallen compared to the previous year, with only 55% confident that they are achieving full compliance, compared with 84% last year.

The responses from Australian CFOs depicted a similar trend, with only 40% of CFOs confident in their overall level of compliance and only 22% having confidence in the clarity and relevance of messages to respective audiences. 

Part of this drop in confidence may be due to the fact that the level of attention given to reporting by key stakeholders has increased dramatically over the past three years, with Australian respondents identifying increased attention from audit committees (90% of respondents), analysts, investors, and financial regulators.

Increased complexity is also having an impact on reporting effectiveness. CFOs identified their top challenges as complexity of the regulatory environment, as well as the complexity of the organisation’s global structure. This partly explains why more than half of Australian respondents said there has been an increase in the number of reports issued, both internal and external.

EY FAAS Partner, Graham Jackson says: “Corporate reporting needs to be all things to all people – relevant, timely and cost effective. CFOs need to step back and evaluate what they are producing and be prepared to engage regularly with key stakeholders on their needs. Only then can they be confident of delivering a valuable product.”

Responding to reporting complexity

The increased complexity and attention from stakeholders has highlighted a number of internal constraints and challenges for Australian CFOs. Internal controls and governance systems, the complexity of the organisation’s global structure, and weaknesses in supporting IT infrastructure are all near the top of the list of challenges.

Half of Australian survey respondents also identified not having a consistent approach to data collection as a key challenge and almost a third said they had to draw on 20 or more reporting systems to gather the data they need for reporting. Not surprisingly then, 90% of Australian respondents are expecting to increase investment in reporting technologies.  

Board and audit committees increase scrutiny

Australian CFOs are also feeling the ripple effect of increased scrutiny from audit committees and supervisory boards. More than half of Australian respondents stated that audit committee reports were not delivered in a timely manner, flagging that audit committees wanted more frequent reporting and more of the right information.  

“Australian CFOs are responding, prioritising a more collaborative relationship with audit committees and boards, as well as harnessing big data to enable better reporting,” Mr Jackson said. 

The survey also found Australian CFOs believe they are making good progress in using data analytics to create insightful reporting data, seeing this as an opportunity to drive further value and enhance decision-support capabilities within their organisations. More than 90% of respondents said that investing in advanced analysis and data mining tools was a medium to very high priority for their organisation. To support this, they are also prioritising the deployment of more sophisticated information management storage solutions and automation in data capture and generation.

Also high on the CFO’s agenda is the need to transform the talent base and skills profile of the finance function, highlighting knowledge of governance, business analysis and ‘IT savviness’ as current skill gaps.

“Audit committees are under the spotlight for how they carry out their responsibilities, so CFOs are in turn under pressure to provide more and more information. Yet it’s important this doesn’t result in reporting overload. CFOs must turn volumes of data into valuable reporting insight, which means having the right strategy, processes and skills in place,” Mr Jackson said.

 

EY’s Are you prepared for corporate reporting’s perfect storm?
Key country highlights (%)

Global

Australia

Brazil

China

Germany

India

Singapore

South Africa

UK

US

Increase in number of reports requested

71

53

80

68

68

60

80

63

58

28

Increase in attention by audit committee

84

90

90

85

73

88

95

73

63

60

Increase in request for reporting by audit committee

43

33

75

40

43

43

43

55

23

43

Expect increase in investment in reporting technology

82

90

85

90

93

100

90

80

93

93

Confidence in degree of compliance of reporting

55

40

78

65

65

45

83

63

60

75

Reporting is effective to secure confidence of the board

48

53

70

73

68

40

70

45

55

45

-ends-

Notes to Editors

About the survey

Are you prepared for corporate reporting’s perfect storm? surveyed 1,000 CFOs or heads of reporting of large organisations to understand the challenges they face in corporate reporting. Over 60% of the organisations were in excess of US$5billion a year in revenues, with 21% in excess of US$20 billion. Respondents were split across the Americas, Asia-Pacific, Europe, Middle East, India and Africa (EMEIA) and Japan, and covered 14 main industry sectors. The survey was supplemented by in-depth interviews with the following CFOs and heads of reporting organisations, as well as EY subject-matter professionals.

About EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

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This news release has been issued by Ernst & Young Australia, a member firm of Ernst & Young Global Limited.

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