Problem Based Learning

The Problem: Reporting Company Accounts - All Things to Every Reader?

Image: Enron - the crooked 'E'. Copyright: Sean Graham, stock.xchng

'It could never happen here.' What couldn't? Enron, Parmalat, WorldCom - the regulation in the UK financial world is so stringent that no company would ever get away with fraud and corruption on that scale. Or could they?

All public limited companies must, by law, publish their accounts and have them fully audited by accountants. The figures are there for everyone to see, expressed according to clear accounting conventions.

In an attempt to ensure that clarity is provided, company accounts are becoming more detailed and more complex to understand. Jeff Randall, the BBC's Business Editor, has lamented the state of reporting of company accounts in a recent article. Randall comments:

'In a world where hatchet-faced lawyers and corporate-governance stormtroopers crawl over every number a company chief executive even dreams about, never mind decides to publish, the pressure to issue results on a mile of computer print-out rather than on one sheet of A4 has become irresistible.'

Source of quote: Jeff Randall, 'Playing the numbers game', dated 21st January 2005, accessed 21st January 2005. http://news.bbc.co.uk/1/hi/business/4191995.stm

Randall goes on to suggest that far from improving the clarity of accounts, modern reporting provides the opportunity for anyone with any agenda to take what they want from the accounts regardless of what is really happening. Is this approach to reporting of company accounts really improving information for stakeholders?