Public Dialogue Tour: New York City
A New York dinner sponsored by the Center for Audit Quality as part of its public dialogue tour focused on the need for forward-looking financial reporting and international standards.
The September 27th event at the St. Regis Hotel, hosted by CAQ executive director Cindy Fornelli, brought together about 30 top business leaders, investors, regulators, academics and public company auditors for a lively discussion of ways to improve financial reporting.
The event was the fifth stop in the CAQ's national dialogue tour, which will result in a final report with specific recommendations next year.
Participants in New York event called for financial reporting that includes non-financial, predictive information.
"One of the aspects of understanding future potential is clearly in the non-financial performance -- the key drivers of business," said Robert H. Herz, chairman of the Financial Accounting Standards Board. "We're actually behind the rest of the world in trying to systematically report those kinds of things."
Rick Antle, an accounting professor at the Yale School of Management, noted that auditors are already asked to make judgments about the future.
"Part of this problem starts with our very definition of what is an asset. An asset is a future benefit. Well, that inherently involves a kind of prediction," he said. "It's silly for us to deny the fact that we're in the game of prediction. But there's a difference between that and expecting kind of a crystal ball."
Reflecting the international character of the guest list, the discussion also dealt with the challenges and promise of the convergence of international accounting standards.
"We have made so much progress on the broad topic of convergence. And I mean broad because it's convergence around regulatory thinking, it's convergence around oversight of our profession, convergence around auditing standards," said James Turley, chief executive officer at Ernst & Young and chair of the CAQ's governing board. "We have made a lot of progress. But from my perspective we are at a both very exciting time and a very sensitive time."
Ian Ball, chief executive of the International Federation of Accountants and a New Zealander, agreed with Turley's assessment, but said he is convinced that global market pressure will force change.
"Pressure for convergence is not really something that's political or regulatory. It's economic. And the pressure is incredibly powerful," Ball said. "I don't think we are going to stop it from happening because it makes economic sense."
The dinner guests agreed that public company audits have improved dramatically in recent years, but some expressed concerns about lingering public skepticism.
William H. Donaldson, a former chairman of the Securities and Exchange Commission, said confidence in financial information and disclosure must improve as much among the general public, now increasingly invested in the markets, as it has among members of the business community.
"I think public confidence generally is still relatively low," Donaldson said. "And if there's been an improvement, it's because the stock market is up."
For his part, the PCAOB's Chairman Mark Olson believes "we have restored the confidence in basic underlying accounting [since 2000]. And we can build from there."
Speaking from the perspective of a British citizen, Anne Simpson, executive director of the International Corporate Governance Network, said auditors play a vital role in fostering confidence in American corporations.
"The real issue for business is about the license to operate, about the sense of legitimacy. And financial reporting and auditing is the channel of information and assurance that gives the public that," she said.
For more information and video from the previous events on the Public Dialogue Tour visit http://www.thecaq.org/events/PDT/index.htm.
If you are interested in attending future events or if you have any questions please send an email to info@thecaq.org
