Mauritian firms to focus on disclosure & transparency for corporate governance
Advocacy, self-interest, self-review, and familiarity are the threats that may adversely impact the independence of auditors, according to Thierry Leung. (Image: Cecilia Samoisi)
The Mauritius Institute of Directors (MIoD) organised a director development programme on disclosure and transparency at the Labourdonnais Waterfront Hotel yesterday, November 6, 2014.
This workshop aimed at making the participants understand the importance of being fair and above-board in corporate communication.
The workshop was attended by nine participants who had Françoise White, Partner/Director at White & White Associates, as facilitator, and Thierry Leung, Associate Director at Ernst & Young, as guest speaker.
Françoise White stated that the process of disclosure and transparency has become more stringent, as it entails a fresh set of responsibilities for the company, and ensures that it going well beyond written obligations to best serve the interests of its stakeholders.
She gave the definition of transparency, which is making sure that the true performance of the company is clearly captured in all corporate communications. She also noted that today, transparency and disclosure are taking on a whole new dimension of being proactive and voluntary, and this move to take stakeholders into confidence can help win their trust and eventually enhance the value of the company.
The participants were told that the essence of disclosure is to possess the ability to communicate those information items that a company wants to share with a particular group of people simultaneously.
Furthermore, Françoise White mentioned the Organisation for Economic Co-operation and Development (OECD) disclosure obligations, where she chose to emphasise the foreseeable risk factors.
She noted that the five pillars of disclosure and transparency are: truthfulness, completeness, materiality of information, timeliness, and accessibility.
“Timeliness is an important pillar because there is no point in disclosing relevant and time-bound information too late. Today, disclosure and transparency can be a competitive advantage for a corporation,” Françoise White pointed out.
She added that reliable and timely information serves as deterrent to fraud and corruption as well as helps companies to differentiate themselves.
According to her, a strong disclosure and transparency regime is pivotal for market-based monitoring of companies and central to shareholder ability to exercise ownership rights.
Additionally, it can be a powerful tool for influencing companies and protecting investors.
On the contrary, a weak disclosure and transparency regime can contribute to unethical behaviour and loss of market integrity as well as hamper the ability of the markets to function by increasing the cost of capital and resulting in poor resource allocation.
She ended on the note that relevance is the main criteria of non-financial information and that relevant information has no universal rule to gauge its importance, but depends on the nature of the business.
“Nowadays, a best practice that is widely prevalent is to have an investor relations departments to explain the company’s vision and strategy to the investing community and to build sell-side community interest,” she concluded.
Guest speaker Thierry Leung spoke on the role of external auditor in disclosure and transparency.
He stated that the perceived role of an auditor is to ensure that accounts are well kept and to detect fraud, if any, but in fact his or her actual role is to express an opinion on the financial statements prepared by directors.
In some cases, an auditor reports on the disclosure of the corporate Governance report and in extremely rare circumstances, he or she expresses an opinion on the system of internal control.
Advocacy, self-interest, self-review, and familiarity are the threats that may impact the independence of auditors, according to Thierry Leung.
He outlined that all these threats impact a lot on a company, for example, if the CEO of a company and the company’s auditor are familiar, this can lead to fraud.
- By Marie-Lorry Coret and Cecilia Samoisi