Chartered Institute of Management Accountants

18 October 2004

CIMA has expressed its concerns that excessively onerous audit requirement and liability implications could bring about a reversal in the current high quality of financial reporting practised by the UK's best companies. CIMA's concerns were expressed in response to the Dti's proposed mandatory introduction of corporate reporting requirements, known as the Operating and Financial Review (OFR). In August 2004, CIMA welcomed proposals for the OFR, as part of its response to the DTI consultation "Draft Regulations on the OFR and the Directors’ Report". However, the membership body which represents financial managers and accountants in business, has also expressed significant concerns over the proposed DTI regulations, particularly over the issue of liability. CIMA's primary concerns are that:
In publishing the OFR, the liability of directors should be fair and reasonable, in order to avoid the need for every word to be vetted by lawyers.   
The requirement to audit the OFR should be limited to a review of the company’s own processes to prepare the OFR, and not so onerous that it forces auditors and directors to take a defensive and bureaucratic stance
Commenting on the proposed regulations, Charles Tilley, chief executive of CIMA said: "The ability to restore confidence in financial reporting is an added-value factor of an organisations' financial statements. To achieve that we would like to see companies taking a 'bold' stance in publishing the OFR and informing investors of issues affecting their current and future financial position. The new regulations have the capability to disseminate good OFR practice. But handled poorly, they will prevent the OFR from living up to its potential."
If you would like more information please contact Lynda Hardy Maskell
Phone: +44 (0)20 8849 2347
Email: lynda.hardymaskell@cimaglobal.com