The European Commission’s DG FISMA has provided greater clarity over the likely content of its proposed guidelines on non-financial reporting, following meetings with ECIIA in September.
Officials at the directorate have confirmed non-financial reporting mechanisms should form part of the overall management reporting system, and that its scope should be similar to existing rules on financial disclosure. In addition, businesses will be encouraged to comment on the effectiveness of their corporate governance framework, and to publicly describe their principal risks and how they are being managed and mitigated.
“We have had constructive dialogue with officials at DG FISMA and emphasised the need for good risk management and internal controls,” ECIIA President Henrik Stein said. “Internal auditors have a critical role to play in the reliability of their organisation’s non-financial reporting because without timely and accurate information Boards and other stakeholders will be unable to depend on the reports’ contents.”
The directorate agreed that providing assurance on an organisation’s non-financial mechanisms was important, but has not specified the exact process for achieving that aim because, it said, that was beyond the scope of the current directive. Under the guidelines, external auditors will provide limited assurance by confirming that the organisation has prepared such a report.
“This is a great opportunity for internal auditors to provide leadership by helping the Board achieve the levels of assurance they need over their non-financial reporting systems,” Stein said.
The Directive should be finalised by end of December 2016 and the detailed guidance completed by end of December 2017.
Read more on the expected details of the directive here.