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Heads of the world's six largest accounting firms have called for a
radical overhaul of the global financial accounting system to take
greater account of social and environmental factors.
In an unprecedented 24-page statement made last month, the chief executives of the firms - BDO International, Deloitte, Ernst & Young, Grant Thornton, KPMG and PricewaterhouseCoopers - say the present financial accounting regime is in danger of becoming irrelevant because it largely ignores extra-financial indicators of a company's health.
They say the accounting profession's short-term priority must be urgent financial reporting issues such as the differences between US and international reporting standards, but argue that in the longer run 'current systems of reporting and auditing company information will need to change toward the public release of more non-financial information customized to the user'.
They say there is a 'range of intangibles that are not well measured or not measured at all' under current accounting conventions, but which, like 'the proverbial canary in the mineshaft', could play a valuable role as forward-looking performance indicators.
The six are to organize roundtables in the US next year to clarify what kinds of non-financial information all interested parties want companies to publish.
The statement has been welcomed by AccountAbility, which has played an important part in the development of social auditing and is one of the leading bodies in the field. However, its chief executive Simon Zadek warned that financial accountants should not try to go it alone, and instead ought to work closely with the increasing number of social auditors.
'The evidence is that financial accountants and auditors, left to themselves, are unlikely to resolve the problem they have highlighted and been party in creating,' he said. 'Robust innovations require a more diverse array of expertise and interests'. He said the big accountancy organizations should 'allow others to become active in rewriting the rule book on financial reporting'.
The statement has been a year in the making, and emerged from a symposium of the big six in Paris last month to discuss how to restore confidence in global accounting in the wake of the corporate scandals that began with Enron's collapse in 2001.
The chief executives say they want their profession to prepare itself for what could be the biggest shake-up of accounting practices since the 1930s.
'We all believe the current model is broken,' said Mike Rake, chairman of KPMG International, who is also chairman of Business in the Community. 'In the next five years you may see a lot of change in this area.'
In an unprecedented 24-page statement made last month, the chief executives of the firms - BDO International, Deloitte, Ernst & Young, Grant Thornton, KPMG and PricewaterhouseCoopers - say the present financial accounting regime is in danger of becoming irrelevant because it largely ignores extra-financial indicators of a company's health.
They say the accounting profession's short-term priority must be urgent financial reporting issues such as the differences between US and international reporting standards, but argue that in the longer run 'current systems of reporting and auditing company information will need to change toward the public release of more non-financial information customized to the user'.
They say there is a 'range of intangibles that are not well measured or not measured at all' under current accounting conventions, but which, like 'the proverbial canary in the mineshaft', could play a valuable role as forward-looking performance indicators.
The six are to organize roundtables in the US next year to clarify what kinds of non-financial information all interested parties want companies to publish.
The statement has been welcomed by AccountAbility, which has played an important part in the development of social auditing and is one of the leading bodies in the field. However, its chief executive Simon Zadek warned that financial accountants should not try to go it alone, and instead ought to work closely with the increasing number of social auditors.
'The evidence is that financial accountants and auditors, left to themselves, are unlikely to resolve the problem they have highlighted and been party in creating,' he said. 'Robust innovations require a more diverse array of expertise and interests'. He said the big accountancy organizations should 'allow others to become active in rewriting the rule book on financial reporting'.
The statement has been a year in the making, and emerged from a symposium of the big six in Paris last month to discuss how to restore confidence in global accounting in the wake of the corporate scandals that began with Enron's collapse in 2001.
The chief executives say they want their profession to prepare itself for what could be the biggest shake-up of accounting practices since the 1930s.
'We all believe the current model is broken,' said Mike Rake, chairman of KPMG International, who is also chairman of Business in the Community. 'In the next five years you may see a lot of change in this area.'
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