public Dialogue: denver, co
Investors need more transparent and timely access to important business information from publicly traded companies, said many participants on a panel about modernizing business reporting held in Denver, Colo., on April 26th. The Denver forum was sponsored by the Center for Audit Quality (CAQ). The CAQ was founded earlier this year to foster confidence in the audit process and be an expert resource and catalyst for public discussion.
The Denver forum featured a panel that included local business leaders, the regional office director of the Securities and Exchange Commission, an investors' advocate and the dean of the University of Denver's Daniels College of Business. Participants in the event included stakeholders in the reporting process — large and small preparers, regulators and standards setters, investors and other users of corporate disclosures, and the accounting profession, among others. The group gathered to discuss the future of business reporting — and the role of public company auditing — to ensure that reported Information remains useful to investors and the capital markets. Through a very robust interaction, panelists discussed changes that are transforming the kind of information investors are using today, the reliability of that information, and the way market participants receive it.
The Denver dialogue was the first in a series of similar public discussions about modernizing business reporting that the Center for Audit Quality will sponsor across the U.S. It was an example of the public company auditing profession's commitment to investors and the markets and its hope to gather perspectives on a host of business issues from a 360 degree view, the CAQ Executive Director Cindy Fornelli said.
"It was a fantastic discussion, lively and provocative, as I expected," Fornelli said. "These are themes we will continue to explore."
After the Denver kickoff event, the CAQ will undertake a broader, long-term effort to identity and suggest courses of action to enhance our reporting system and ensure it remains relevant, reliable and strong. The CAQ may also make recommendations on other issues affecting investors.
Fornelli opened the 90-minute session by noting that rapidly improving technology and an increasingly global marketplace present opportunities for investors and challenges to auditors, regulators and company leaders who are determined to make business information about publicly-traded companies as reliable as possible. One of the major themes that emerged from the panel was the huge quantity of financial information now available to the public and the complexity of financial reports loaded with legal caveats.
"The more data you give them [investors], the more important they think it is. In the desire to give investors lots of information, we've confused them as to what's important," said Dessa M. Bokides, former Executive Vice President and Chief Financial Officer, ProLogis.
Lynn Turner, former Chief Accountant at the Securities and Exchange Commission and currently Managing Director of Research at Glass Lewis & Co., said he thinks it's unrealistic to expect investors "already working 40 hours a week" to take the time to learn and keep up with the changing intricacies of financial reporting.
"When we talk about who is using these financial statements, it doesn't include the vast majority of the 90 million Americans" who invest in capital markets," Turner said.
Panelist George A. Sissel, former Chairman and Chief Executive Officer of Ball Corporation, agreed. "Financial statements these days are so complex, so arcane that [the investor] needs an intermediary expert between the company and that person," Sissel stated. "Some companies give guidance, some companies give guidance with a great disclaimer, and some companies refuse to do it because they'll be held to it."
Another theme of discussion was the focus of business reporting. Many expressed a desire to have business reporting center more on a company's future rather than how it performed in previous months.
"We need access to accurate information across the board," said panelist Karen L. Newman, Dean of the University of Denver's Daniels College of Business. "Financial reporting focuses on the past, and it is not yet very sophisticated in telling us where the puck is going. That might involve a completely different way of looking at financial reporting."
When the panel turned to examining how the public company auditing profession could better serve investors, they recognized that though investor confidence has increased since the Sarbanes-Oxley Act was signed into law in July 2002, upholding audit quality is a continuing challenge that must be met.
"I would say they [the public company auditors] are doing an excellent job today," said Turner. "We're paying for it, but we're getting something for our money. That is really positive."
Panelist George B. Curtis, head of the Securities and Exchange Commission's Denver regional office, said that "an auditor will not always find fraud. An auditor cannot always find fraud. I don't personally view auditors as fraud finders," Curtis said. "I do see them as professionals exercising their best judgment."
Some panel members said they also hope that investors can take advantage of the explosive growth of company financial data and other investment aids currently available on the Internet, although, as Turner noted, "No one is giving that away."
The Denver dialogue represented an exciting start to the effort to generate constructive ideas for modernizing business reporting to better serve investors and the markets. The CAQ hopes to expand and build upon this effort by bringing together other experts in future dialogues, the second of which is scheduled for Charlotte, N.C. on May 15.
Panelists at the April 26 Denver event sponsored by the Center for Audit Quality included: George A. Sissel, former Chairman and Chief Executive Officer, Ball Corporation; Lynn Turner, Managing Director of Research, Glass Lewis & Co.; George B. Curtis, Regional Director, Central Region, Securities and Exchange Commission; Dessa M. Bokides, former Executive Vice President and Chief Financial Officer, ProLogis, and Karen L. Newman, Dean, Daniels College of Business, University of Denver.
