President and CEO, The Institute of Internal Auditors
Only a decade ago, integrated reporting was little more than an idea. Since then, the need for a single, global, common framework for integrated reporting has gained widespread recognition. Organizations in over 70 countries have adopted the IIRC’s International <IR> Framework, and the International Federation of Accountants (IFAC) has stated that integrated reporting is the future of corporate reporting. What a difference a decade has made. Yet, while we have made tremendous strides, integrated reporting is still in its infancy. Much work is yet to be done.
What’s ahead? In the next decade, I believe that standardization will be a significant issue. It won’t be easy to further develop the frameworks, standards, and measurements needed for optimal reporting. Those frameworks and standards must be rigorous; yet, they also must be flexible enough to meet the needs of diverse stakeholders, regardless of company size, industry, or geographic location. And, while the requirements must be flexible, they also must be consistent enough to provide comparability.
We must assure that our frameworks and standards lead to reports that are concise enough to be read cover-to-cover, yet comprehensive enough to include all material issues. We must develop mechanisms that help assure reporting is accurate, objective, clear, concise, constructive, complete, and timely. Above all, we must work toward ensuring that our reports provide information that is useful.
It’s a big job. Unlike financial reporting, the systems and processes for producing and disseminating integrated reports are still being developed, and control breakdowns are most likely to occur when systems and processes are changing. The future path of integrated reporting looks bright, but there will be bumps along the way.
The Institute of Internal Auditors (IIA) applauds recently announced efforts by the IIRC, the Climate Disclosure Standards Board, CDP, the Global Reporting Initiative, and the Sustainability Accounting Standards Board to collaborate toward a comprehensive integrated reporting system that includes both financial accounting and sustainability disclosure. This is a major step in addressing stakeholders’ increasing demands for assurance over integrated reporting. Auditing plays a crucial role in the process, as well, improving reporting accuracy and credibility, and increasing report usefulness and effectiveness toward appropriate decision-making.
The scope of internal auditing is broad, encompassing all of an organization’s governance, risk, and control processes. Internal auditors provide assurance regarding the reliability of financial reporting, but they also provide assurance regarding non-financial information. They help to ensure that an organization is held accountable to its stakeholders, keeping an eye on the corporate climate and performing a variety of activities such as assessing risks, analyzing opportunities, suggesting improvements, promoting ethics, educating senior management and the board on critical issues, investigating fraud, detecting wasteful spending, raising red flags, recommending improved controls, monitoring compliance with rules and regulations, and more.
Our path forward in the coming decade may well prove that one of the most important ways to ensure the success of integrated reporting is simply to ensure that internal audit resources are appropriate, sufficient, and actively engaged in our integrated reporting initiatives.