Review by: HAN AI LEEN
Title: Building Public Trust – The Future of Corporate Reporting
Authors: Samuel A. Di Piazza Jr. and Robert G. Eccles
Publisher: John Wiley & Sons
FOLLOWING a series of detrimental developments in corporate reporting, Samuel A. Di Piazza Jr and Robert G. Eccles attempt to review and study the future of corporate reporting in Building Public Trust – The Future of Corporate Reporting.
Di Piazza Jr is chief executive officer of PricewaterhouseCoopers while Robert G. Eccles is president of Advisory Capital Partners, former Harvard Business School professor and PricewaterhouseCoopers senior fellow.
Readers would remember and some may still feel the impact from the shattering of a prestigious global accounting firm.
The shocking incident led to many events, including an industry-wide crisis in corporate reporting; criminal and civil litigation against management, financial institutions and law firms; stock market volatility caused by repeated restatements and uneasy investors; and increasing pressure on and by the US Securities and Exchange Commission to consider implementing new rules and regulatory bodies.
Till today, many are still left confused by the aftermath, and public trust has been badly shaken.
Aptly put by Wick Simmons, chairman and chief executive officer of the Nasdaq Stock Market, Inc in the foreword, “The problem and the challenge are global ? Corporate reporting is an intricate discipline, but everyone from the executive suite and corporate boardroom to the storefront brokerage firm understands its importance to themselves, to their companies, and to their countries”.
The book, set to regain the public confidence in corporate reporting that was lost, sees the authors proposing new industry frameworks and emphasising the need for effective implementation: the Three-Tier Model of Corporate Transparency (Tier One – globally generally accepted accounting principles; Tier Two – industry-based standards and Tier Three – company-specific information) and the call for industry use of Internet-enabled platform called the Extensible Business Reporting Language (XBRL®), one of the key enabling technologies in their proposed Corporate Reporting Supply Chain.
The authors claim that criticisms of the Global GAAP (generally accepted accounting principles) have been mounting as they are all based on an historical cost model and today’s more complex business environment challenges the relevance of historical cost information.
Hence, Tier One will involve confronting these issues at various levels and will require cooperation among many parties, including national standard setters, key regulators, governments, the corporate community, and the auditing profession.
Tier Two is straightforward. Industries need to have industry-specific standards, which organisations worldwide are able to apply to, to create a broad commonality in reporting among peer companies for transparency and order.
Tier Three would consequently lead to the need for transparency on information about strategy, identified risks, risk management and compliance, compensation policies, corporate governance, and company-specific performance measures on key value drivers.
To report publicly and completely on these value drivers, within the bounds of competitive good sense, is the very meaning of transparency.
The debate continues in Chapter 6 where the authors explore in detail how the XBRL can contribute to improve the quality of the information being used, the speed and frequency, the usefulness of the information and the completeness of the information used in analysis.
Overall, the book is timely and with the exit of the scandal-ridden accounting giant, no one except PricewaterhouseCoopers seems to have the global clout in directing the future of the industry.
While the authors engage in fruitful and meaningful discussion to better global corporate reporting, at times, their proposal seems simplistic.
A call to the local PricewaterhouseCoopers office to check if the Three-Tier Model is being cascaded or made known to every office was futile.
Subsequent attempts to confirm if a particular system is being put in place to address such concerns also revealed a general reluctance from the local office to share local corporate reporting practices that the authors in New York have so strongly proposed. This, unfortunately, robs the book of potential credibility.
Still, the book continues to encourage a revival in the industry and provides a refreshing, if not, idealistic, approach to global corporate reporting.
Did you find this article insightful?