Investors generally have a thirst for information. Currently one of the areas being explored is whether the audit committee should provide more information about the audit close process.

Investors have expressed a desire to know more about the work of the audit committee, in particular, the subjective areas discussed by the finance director, auditor and committee in terms of determining how the accounts have been prepared.

Investors feel that such information would provide a view as to how and where the earnings figure finally alighted on sits within an acceptable range. This may be understandable, but from the audit committee perspective is it the body that should be providing such information?

It goes back to what the role and function of the committee should be. It is not a shareholders’ committee but a sub-committee of the board, and a unitary board at that. It follows that any information regarding the company’s accounts should come from the company itself.

In terms of discussing any details of accounting for the company’s performance, all information should probably come from the executive. Also, separate reporting by an audit committee, or its chairman, to a distinct group of investors might fall foul of insider trading regulations.

The committee has responsibility to oversee the financial close process and audit thereof, but this is on behalf of the whole board which ultimately takes responsibility for what is presented. Any further information about that process and the conclusions drawn should form part of the communication between the company and the shareholders, rather than through any other route. This is, after all, what stewardship reporting is all about.

The Market Participants Group, taking forward recommendations arising from the FRC’s consultation, has suggested increased disclosures on the issue of auditor choice. So it is likely that the committee reports will have some increased disclosures, but not more financial information.

The view is that the financial statements should stand on their own. As one committee chair put it: ‘If there is an issue, then we properly direct attention there. Rather than saying that it’s the role of the audit committee to say that, it’s the role of the financial statements.’

One can’t help agreeing.

Gerald Russell is a senior partner at Ernst & Young