Non-financial information should face similarly stringent testing to financial data, ICAEW finds in report
NON-FINANCIAL INFORMATION must be as reliable as its financial counterpart for investors to make informed decisions, according to ICAEW.
Today’s report from the institute, The journey milestone 4: materiality in assuring narrative reporting, found that the ‘materiality’ test for financial information must be similarly applied to non-financial information.
The ICAEW said the same assurance principles apply to both financial and non-financial information, so assertions should be tested for; completeness, occurrence and accuracy, as well as presentation and how easy they are to understand.
The report cites the recent diesel car emissions scandal as a perfect example that illustrates how important non-financial aspects are.
The disclosure last year that Volkswagen installed devices to circumvent mandatory emissions regulations for its diesel engines has caused the company’s shareholders and bondholders to suffer billions of euros in losses.
Head of the ICAEW’s audit and assurance faculty Henry Irving said: “As important as financial statements are, business accountability is not based entirely on the balance sheet. Investors, and others also want to know about company’s corporate social responsibility, carbon emissions, diversity or ethics.
“When establishing materiality levels preparers and assurance providers should focus on both qualitative and quantitative aspects.”