As part of our process, we prepared a list of questions designed to help check whether report and accounts was“fair, balanced and understandable” (set out below), which the audit committee were asked to consider when they reviewed the accounts.
Fair
• Is the ’whole story’ of the year presented?
• Is any sensitive or difficult material information omitted?
• Are segmental disclosures consistent with how segments are monitored internally?
• Are the front half segment disclosures reflected in the back half presentation?
• Are KPIs well defined and disclosed consistently with internal monitoring?
Balanced
• Is the document designed to suit the needs of shareholders – what would you want to know?
• Are the front and back halves of the report consistent?
• Is there an appropriate balance between statutory and non-statutory measures, and are non-statutory measures clearly defined?
• Are key judgements in narrative consistent with the audit committees risks/issues and key areas of uncertainty/judgements?
• How do the key risks and issues align themselves to the audit report?
Understandable
• Is the overall document clear and understandable to an average shareholder?
• Are important themes and messages clear throughout?
• Is there any undue complication and or repetition in the accounts which could be removed?
• Is the language used clear, jargon-free and understandable?
• Are new messages and themes in the accounts clearly articulated?
FTSE250said
EY issued this note, which includes some examples which may help. We provided a copy of this to our audit committee, with details from teh FRC guidance etc. We felt the key was around balance, reporting good and bad news, proportionately to impact on the group, that the report and accounts were saying the same things (i.e. no hidden surprises in one part) and that the report covered what was actually being discussed around the board table. http://www.ey.com/Publication/vwLUAssets/Meeting-the-fair-balanced-and-understandable-challenge/$FILE/EY-CG-FBU-challenge-Sept-2013.pdf
As part of our process, we prepared a list of questions designed to help check whether report and accounts was“fair, balanced and understandable” (set out below), which the audit committee were asked to consider when they reviewed the accounts.
Fair
• Is the ’whole story’ of the year presented?
• Is any sensitive or difficult material information omitted?
• Are segmental disclosures consistent with how segments are monitored internally?
• Are the front half segment disclosures reflected in the back half presentation?
• Are KPIs well defined and disclosed consistently with internal monitoring?
Balanced
• Is the document designed to suit the needs of shareholders – what would you want to know?
• Are the front and back halves of the report consistent?
• Is there an appropriate balance between statutory and non-statutory measures, and are non-statutory measures clearly defined?
• Are key judgements in narrative consistent with the audit committees risks/issues and key areas of uncertainty/judgements?
• How do the key risks and issues align themselves to the audit report?
Understandable
• Is the overall document clear and understandable to an average shareholder?
• Are important themes and messages clear throughout?
• Is there any undue complication and or repetition in the accounts which could be removed?
• Is the language used clear, jargon-free and understandable?
• Are new messages and themes in the accounts clearly articulated?
EY issued this note, which includes some examples which may help. We provided a copy of this to our audit committee, with details from teh FRC guidance etc. We felt the key was around balance, reporting good and bad news, proportionately to impact on the group, that the report and accounts were saying the same things (i.e. no hidden surprises in one part) and that the report covered what was actually being discussed around the board table.
http://www.ey.com/Publication/vwLUAssets/Meeting-the-fair-balanced-and-understandable-challenge/$FILE/EY-CG-FBU-challenge-Sept-2013.pdf