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Sometimes the old can learn from the young. Compared with century-old
financial auditing, social auditing is a pup, a distinct discipline
only since the 1970s. Yet, though still felt to be lacking rigour and
professional standards, social auditing might be about to prove its
usefulness to business.
If the present system for assessing the value of companies is bust, as the heads of the six biggest financial auditing firms say (see page one), what will replace it? Their vision explicitly demands information of the sort found in non-financial reports be given much greater weight.
These heads of firm have serious clout. Their statement may be self-serving, but they are calling for a global conversation involving all stakeholders. Having triggered the debate, they will not be able to control it. This is a huge opportunity for advocates of corporate social responsibility. The character of the discussion will depend largely on the social auditing profession's ability to make a high-quality input. Will it meet the challenge?
People are still waiting for social reports to look more like financial reports: more comparable figures, more order, and more generally agreed principles. These remain urgent priorities. Nevertheless, financial auditors recognize they must take some leaves out of the social auditors' book.
A key theme of their statement is the need to focus on the process of recording business information rather than on the static formats in which financial data is currently presented. Social auditors have experience in this area, having developed and implemented standards for stakeholder dialogue and other procedures which by their nature are process-driven.
Then there is assurance. A financial statement either complies with accounting standards or it does not. Non-financial reports often come in shades of grey. Assurers of social reports are used to giving nuanced opinions about the information presented and to making qualitative judgements in assurance statements. Their knowledge will be essential to reform reporting as envisioned by the heads of the Big Six accounting firms. Furthermore, their assurance statements are forward-looking - another crucial area in which financial auditors, who spend their time looking in the rear-view mirror, can learn from their social auditor peers.
More real-time reporting of business information will provide a further shot in the arm for CSR. Forecasts of quarterly earnings will become less relevant, leaving company managements to pursue the long-term strategies CSR can most effectively support.
Social auditors and assurers need to come out of the closet now. So do the companies at the leading edge of social reporting. For a successful overhaul of the accounting system, the financial auditors must learn from the social auditors. Time will tell whether both are up to this historic task.
If the present system for assessing the value of companies is bust, as the heads of the six biggest financial auditing firms say (see page one), what will replace it? Their vision explicitly demands information of the sort found in non-financial reports be given much greater weight.
These heads of firm have serious clout. Their statement may be self-serving, but they are calling for a global conversation involving all stakeholders. Having triggered the debate, they will not be able to control it. This is a huge opportunity for advocates of corporate social responsibility. The character of the discussion will depend largely on the social auditing profession's ability to make a high-quality input. Will it meet the challenge?
People are still waiting for social reports to look more like financial reports: more comparable figures, more order, and more generally agreed principles. These remain urgent priorities. Nevertheless, financial auditors recognize they must take some leaves out of the social auditors' book.
A key theme of their statement is the need to focus on the process of recording business information rather than on the static formats in which financial data is currently presented. Social auditors have experience in this area, having developed and implemented standards for stakeholder dialogue and other procedures which by their nature are process-driven.
Then there is assurance. A financial statement either complies with accounting standards or it does not. Non-financial reports often come in shades of grey. Assurers of social reports are used to giving nuanced opinions about the information presented and to making qualitative judgements in assurance statements. Their knowledge will be essential to reform reporting as envisioned by the heads of the Big Six accounting firms. Furthermore, their assurance statements are forward-looking - another crucial area in which financial auditors, who spend their time looking in the rear-view mirror, can learn from their social auditor peers.
More real-time reporting of business information will provide a further shot in the arm for CSR. Forecasts of quarterly earnings will become less relevant, leaving company managements to pursue the long-term strategies CSR can most effectively support.
Social auditors and assurers need to come out of the closet now. So do the companies at the leading edge of social reporting. For a successful overhaul of the accounting system, the financial auditors must learn from the social auditors. Time will tell whether both are up to this historic task.
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