FRA Partner Weng Yee shares her thoughts on the UK government's proposal to place greater responsibility on directors for ensuring the quality of their firms' financial statements.Accounting scandals involving Carillion, Patisserie Valerie and Thomas Cook prompted more questions surrounding the standards of UK corporate reporting and auditing.
The government's Department for Business, Energy and Industrial Strategy (BEIS) published a document in March 2021 suggesting making individual directors, rather than boards as a whole, personally responsible for the accuracy of their companies' financial statements as they sign off on internal controls and risk management. But 78% of non-executive directors polled by EY in August 2021 reported that their jobs had become increasingly complex and time-consuming in recent years.
Weng Yee said that there was "a balance to be struck. Implementing heavy and overly burdensome legal requirements to catch a small proportion of misbehaving directors may end up deterring and, to a degree, penalising good and talented directors. Experience tells us that there'll probably never be a perfect equilibrium."
She added that CEOs should consider improving the quality of independent oversight. This should help to instil confidence and prevent under-resourced finance teams from becoming overloaded with legal burdens further down the road.
Read the full article here: https://www.raconteur.net/finance/personal-accountability-financial-statements/