Making Financial Reporting Better

High-quality accounting standards serve the public interest. In setting Standards of GRAP, the primary focus is on the needs of the users of financial statements who require credible financial information. It is therefore essential that financial reporting provides users of the financial statements with concise, understandable and relevant information for improved accountability and decision-making.

Improvements to financial reporting should not be delayed until the next accounting scandal or economic crisis occurs. Financial statements prepared in accordance with the Standards of GRAP are an instrument in the toolbox for the effective functioning of government. Efforts must be made to assess ways to improve the quality of financial statements and to ensure that the users of financial statements understand their purpose in providing a comprehensive picture of the government’s finances.

The ASB’s recent projects highlighted ongoing issues in the application of the requirements in the Standards, especially when accounting for assets. These requirements are often misunderstood and misapplied, or entities have poor financial management resulting in deficient information in the financial statements. These findings are consistent with the AGSA’s audit outcomes and are a major cause for concern, as low-quality financial statements result in a loss of credibility and negatively impact users’ ability to hold entities accountable and may result in poor decision-making.

There is an urgent need to strengthen the quality of financial reporting in the public sector. Everyone has a role to play. All stakeholders involved in the financial reporting environment should share the vision of improving the quality of financial reporting.

The views expressed in this article are those of Secretariat and not the ASB Board.