Hitherto understood as the reference document for investors and stakeholders in company performance, dedicated financial reporting now also includes a social and environmental impact component of a company.
With the origin of the debate that goes 30 year back, the integrated financial reporting perfectly captures the need for companies to perform and, at the same time, be responsible. Performance obtained by pursuing "the objectives of the present" and the responsibility of achieving the results "without compromising the ability of future generations to achieve their own goals." This goal has led to the refinement of this principle and its clearer definition through the emergence of a new "triple bottom line" concept.
Differences from the classical financial reporting
Compared to the classical financial reporting, based only on financial data, known in the international language as "bottom line", the integrated financial reporting also has two components: society and the environment, hence the name "triple bottom line". That is, the business objectives are inseparable from the company and the environment in which they operate, and failure to take into account the impact on these two components would make the company operations unsustainable. This is how the concept of corporate social responsibility or corporate sustainability was born at the end of the last millennia.
But in order not to remain just a set of principles and for them to go into implementation and to produce results, these good intentions have been transposed into legislative initiatives at the level of the European Commission. Since 2011, with improvements and modifications, legislation has emerged that clearly stipulates the obligation of companies to communicate transparently information with social and environmental impact.
Investor confidence building tool
Seen as an information sharing tool for increasing consumer and investor confidence, the financial reporting means annual financial statements and non-financial reporting. The latter provide additional information showing active social involvement and environmental protection measures adopted by a company. These reports therefore detail how corporate social responsibility (or "CSR", "Corporate Social Responsibility") is applied by the listed entities.
In order to structure information and easily track it, different framework models are used in integrated financial reporting. These typically include: company mission and vision, development strategy, CSR strategic role, corporate CSR actions, challenges and results, progress, monitored indicators and stakeholder engagement.
In Romania, by transposing of the European legislation, the required non-financial information is modified and the "non-financial / (consolidated) declaration" is introduced. The provisions are applicable from 1 January 2017 for public interest entities with an average of 500 employees on the date of the balance sheet.
Audit of integrated financial reporting
Considering the high complexity of the compiled financial reporting compared to the classical annual financial reports, the question arises as to how the financial auditor will issue the assurance opinion on a set of integrated financial statements. Possible responses to the challenges posed by the audit of integrated financial reporting could be:
1. Identify existing practices that can be adapted
2. New conceptual analyzes and the development of new standards
3. Rethinking the auditors' liability in the context of which part of the information included in the integrated reporting is too subjective to be reasonably assured
4. Identifying insurance formulas to obtain a reasonable cost / benefit ratio and, last but not least,
5. Develop new, more subjective insurance standards based on professional judgment and principles.
Therefore, the values of the society change from one period to the next, becoming more centered on the sustainable development of the global economy. Financial reports are adapted to these developments, including mandatory minimum non-financial reporting requirements. In order to be able to issue assurance on integrated financial reporting, the audit profession should adapt the methodologies, the way of selecting and evaluating audit evidence, other important aspects of control and transaction testing on non-financial indicators, to keep pace with major changes place.
