PracticeAuditAuditors left in the dark as OFR is welcomed

Auditors left in the dark as OFR is welcomed

The implementation of a mandatory operating and financial review for large UK companies may benefit shareholders and stakeholders, but has done little to offer auditors certainty about their role in policing the regime.

Link: The OFR: Guiding principles for directors

Last week, the DTI’s working group released a consultation document, setting out the broad principles which directors should follow in deciding what information is ‘material’ and should be included in the OFR.

The working group recommends that the OFR include both historic and forward-looking events and trends, including facts and events, probabilities, as well as risks and opportunities.

Reacting to the launch of the document, Diane Hay, chief executive of employee share ownership body ProShare, said a mandatory OFR would benefit the private investor because it would ‘provide them with the kind of information they are looking for’.

Nigel Sleigh-Johnson, head of financial reporting at the ICAEW, said high quality reporting was ‘in the interests of both business and investors, but said the institute would be ‘scrutinising the proposals rigorously’.

But the document itself does not recommend what specific role auditors should play. Michael Hughes, chairman of audit at KPMG, said it was as yet unclear as to how the auditors will report ‘on the adequacy of the procedures adopted by directors in preparing the OFR’.

Consultation closes in September, with the working group due to publish a final report in December.

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