CA ANZ pushes for mandatory digital financial reporting
The professional body has called for digital financial reporting to be made mandatory in Australia as part of recommendations for an inquiry into the big four firms.
CA ANZ has called for digital financial reporting to be mandatory in Australia for listed companies in its response to Treasury consultation on the regulation of accounting, auditing and consulting firms.
The professional body said while voluntary digital reporting to ASIC has been made possible for around ten years, no submissions have been made yet.
"Australia has fallen behind other major markets around the world, most of which have required tagged, machine-readable digital reporting for several years," it said in the submission.
CA ANZ said it strongly recommends making digital financial reporting mandatory based on its extensive outreach to understand the views of investors, professionals, regulators, businesses, and focused research and analysis.
"In a complex global context where financial analysis and investment decisions increasingly rely on artificial intelligence and other technology driven approaches, Australia’s capital market is rendered effectively invisible or at best inaccurately viewed through continued use of paper and online pdf financial reporting," it said.
"As detailed below, retail investors are demanding digital reporting to make financial reports more accessible and customised to their needs. Reporting is set to become even more complex and voluminous in the near future with the adoption of mandatory climate and sustainability disclosures."
Digital reporting would enable for greater scrutiny of financial reporting and auditing which is impractical or impossible with a PDF and paper-focused reporting system, according to the professional body.
The barriers to adoption in the listed company space have decreased significantly over the past five years, with the introduction of software solutions, integration into existing systems and teething issues having been addressed in overseas markets, the submission said.
CA ANZ said this means that the costs and challenges are marginal, and are far outweighed by the opportunity cost of falling behind the rest of the world and leaving Australian shareholders poorly served.
The submission acknowledged that the benefits, barriers and cost considerations are less clear when it comes to privately owned companies and other types of entities such as not-for-profits and charities.
"Digital reporting in other major markets has been led by the needs of capital markets investors, mostly those separate from owners, although there are regulatory benefits in having machine readable financial reporting for the wider population of entities," said CA ANZ.
"The investment in systems and other costs of digital reporting are highly synergistic with existing financial reporting processes in larger, listed entities, however, this may be a much larger step up for smaller, private companies, not-for-profits and charities."
CA ANZ said that further work would be needed to justify and appropriately scope a digital reporting mandate for these entities, with suitable transition and phasing arrangements being critical components.
