As economic headwinds mount, global securities regulators are calling on public companies and their auditors to ensure they’re providing full, timely disclosure.
The International Organization of Securities Commissions (IOSCO) issued a public statement that stresses the need for issuers to provide investors with insight into the financial implications of unusual factors such as the lingering effects of Covid-19, fallout from the conflict in Ukraine, supply chain challenges, and evolving financial and economic conditions amid high inflation and rising interest rates.
In its statement, IOSCO called on issuers, their auditors and audit committees to be “particularly vigilant in times of economic uncertainty in their consideration of how risks and uncertainties that could affect or have affected an issuer’s operations, financial condition, cash flows and prospects can be transparently communicated to investors.”
Shifting economic conditions can increase uncertainty in financial reporting, so it’s important to be transparent about significant management decisions in assessing these impacts, changes to underlying financial assumptions, and companies’ efforts to address these kinds of risks, it said.
“Issuers should carefully evaluate how economic uncertainty and changes in assumptions affect their operations, create risks of fraud and deficiencies in internal control, and affect the amounts reported in the financial statements,” the statement said.
Additionally, fast-changing conditions also raise the risk that companies face material events between ordinary reporting periods that require added disclosure, it noted.
The group of regulators reiterated that they are committed to the enforcement of high-quality reporting standards and disclosure regulations.