Risk managers and auditors key to meeting proposed EC financial reporting rules

Joining forces with the European Confederation of Institutes of Internal Auditing (ECIIA) at a breakfast meeting at the European Parliament this week, Ferma said that its members and internal auditors have a key role to play in ensuring that future financial transparency standards are well understood, embedded into the corporate strategy and a source of competitive advantage. The two associations agree that their members will have to work closely with chief financial officers to meet new reporting requirements under EC proposals and support good governance, sustainable growth, sound investments and job creation. The EC published proposals on 12 April to extend country-by-country financial reporting to most multinational groups operating in the EU. The EC hopes to force greater corporate tax transparency through the introduction of such public reporting requirements. It said its latest plans will build on the Commission's ongoing work to tackle corporate tax avoidance in Europe, which is estimated to cost EU countries €50bn to €70bn a year in lost revenues.hideThe proposals supplement other measures such as the introduction of sharing of information between tax authorities. The EC said that its proposal is a simple and proportionate way to increase large multinationals' accountability on tax matters without damaging their competitiveness. It will apply to thousands of large firms that operate in the EU but will not affect small and medium-sized companies. The EC noted that mandatory public country-by-country reporting will enable citizens to scrutinise the tax behaviour of multinationals. This will, in turn, hopefully encourage companies to pay tax where they make their profit. "This reporting will also support efforts to gain a better insight into member states' tax systems and help identify existing loopholes and mismatches, thereby shedding more light on the causes and consequences of corporate tax avoidance," concluded the EC. This proposal for a directive has been submitted to the European Parliament and the Council of the EU. The EC said that it hopes that this will be swiftly adopted in the co-decision process. Once adopted, the new directive would have to be transposed into national legislation by all EU member states within one year. MEP Jeppe Kofod hosted a meeting on the proposals this week at which Ferma and the ECIIA called for a strong and joint response from members if, and more likely when, the proposals become law. Typhaine Beaupérin, Ferma's CEO, said: "Increased corporate transparency is pushing large corporations to adapt their internal organisation to new models, with both risk management and internal audit professions at the forefront of this evolution." On behalf of Ferma, Jonathan Blackhurst, head of risk management at UK firm Capita, said country-by-country reporting will result in the publication of a large amount of highly technical information. "While this is the responsibility of CFOs, risk managers have a strategic advisory role to play in ensuring that the figures are put into context so they show where economic value is created along the whole company's external and internal supply chain," he stressed. Silvio de Girolamo, chief audit executive at Autogrill in Italy, said: "Internal audit can contribute to the quality of transparency by giving assurance on corporate culture, on the risks and on company processes that generate figures and information for country-by-country reporting. This is useful not only for compliance matters but also to promote confidence between corporations and all stakeholders." Pascale Vandenbussche, ECIIA secretary general, noted that the new reporting requirements would mean a new collective responsibility for ensuring compliance. Therefore boards and senior management will need to rely on professionals to "adjust and possibly turn corporate transparency into a competitive advantage globally”, he said.

Risk managers and auditors key to meeting proposed EC financial reporting rules

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