In recent months, many questions have been raised regarding the global regulatory framework, preparation and usefulness of financial statements, fraud, risk management, and internal control.
To address these concerns, Standards Working Group of the Global Public Policy Committee
(GPPC) commissioned Ipsos MORI to conduct research among CIOs, Portfolio Managers,
Directors of Research, and Analysts who buy, sell, and/or analyse securities. The research was fielded earlier this year in the US, UK, France Germany, Japan, India, Singapore, Hong Kong, and
China with the hopes that the findings would be used to inform discussions with regulators and industry groups.
The following is what we have learned from the respondents of the survey.
A clear majority of respondents support all four of the G20 principles:

Strengthening transparency and accountability in financial markets including a number of short term actions concerning accounting standards – 85% support

Enhancing regulation, including regulatory regimes, prudential oversight and risk management, to include transparent assessments of national regulatory systems – 82% support

Promoting integrity in financial markets, including preventing fraudulent activities and abuse
– 87% support

Reinforcing international cooperation among national and regional regulators, including consistent formulation of regulations and other measures – 85% support with especially strong support for promoting integrity. A detailed breakdown by country reveals that support is generally stronger in France (perhaps reflecting the high profile position of the
French government on these issues). The US meanwhile, is strongly supportive of promoting integrity, though is less convinced than some on international cooperation and enhanced regulation. Support for the G20 principles is generally least widespread in Japan and Singapore.
Seven in 10 (69%) agree that the financial crisis of 2008 demonstrates the need for a more globally consistent approach to standards, regulation, and enforcement, while only 13% disagree.
Although not a significant difference, it is perhaps not surprising that disagreement is most widespread in US. France is again strongly in support of global consistency, as is India. In contrast, only half of Chinese respondents believe the crisis had made the case for consistency.
Just under two-thirds of respondents agree that the variations increase the cost of capital for companies. There is some variation in the level of support though only in Singapore do less than half of respondents agree.
Over half of the respondents say that there should be a clear separation between the requirements for financial and prudential reporting - a quarter actually say there should not be a clear separation.
Support for clear separation is relatively weak in Japan and Germany, where only just over a third agree. With the exception of France, the strongest agreement is in Asia Pacific.
Staying consistent with those who think there should be a separation between financial and prudential reporting requirements, just over half of the respondents are concerned about the potential conflict between the demand for transparency and the requirement for financial stability.
Investors may be genuinely unconcerned about the potential conflict, or they may not have had an

opportunity to think through the issues, and a possible gut reaction/conclusion they come to is that there should not be a conflict and that somehow the relevant parties should ‘find a solution’.
A number of significant alleged frauds have emerged since the crisis began. Respondents were asked to suggest a number of priority steps that could be taken to improve fraud prevention, taking into account cost/benefit considerations and the most common response related to some type of enforcement. More regulations/resources for regulatory enforcement, transparency, and better enforcement of current regulation are important directives to fraud prevention.
To follow up on this, respondents were asked about the current fraud prevention measures. In terms of both quality and cost, two-thirds of the respondents agree there is insufficient clarity on the effectiveness of fraud prevention measures, though a fifth do not. Agreement is most widespread in India, a country that has seen a major corporate fraud most recently.
Greater comparability of financial information is the standout finding on the benefits of a single, global, consistent set of accounting standards. When compared with other countries, the strongest support comes from Singapore, India, and Japan.
With regards to auditing standards, the benefits, of a single, global, consistent set of auditing standards, the pattern is similar to what we see for accounting, with comparability and transparency being the key benefits. And again, the strength of the support comes from
Singapore, India, and Japan.
Two-thirds of respondents believe a single, global, consistent set of ethics and independence standards for auditors would benefit investors by providing them with greater clarity. More than half say a it would help by reducing complexity for audit committees, auditors and regulators in applying a common independence code.
One interim solution that has been suggested is for regulators to allow the International Ethics
Standards Board for Accountants standards to be used in the audit of foreign subsidiaries in group audits. Well over half of the respondents indicate their support for an interim solution that involves using IESBA standards in the audit of foreign subsidiaries. However, a third of the respondents are neutral, and only 15% strongly support this approach – 0% in Japan - which may suggest that many are not particularly engaged or understanding of the proposed solution.
In line with other research Ipsos MORI has conducted over the years, the respondents of this study indicate that financial performance measures feature strongly as a source of information for investors when making decisions about companies. Investors still seem to prefer these to nonfinancial KPIs. Environmental performance measures do not rank highly – again this has been a regular finding over several years. Disclosure of off-balance sheet entities would seem to reflect the concern about the hidden commitments being held by organisations such as banks in the build up to the current crisis.
There were some noteworthy differences by country: Germany places particular emphasis on the management commentary on risks, while Japan, UK and US – the three biggest financial centres – are those with the most widespread emphasis on financial performance.
Opinion on the length of audit reports is evenly split for longer/more detailed or shorter/more succinct reports. The UK sees the greatest demand for shorter reports (59% vs 33% for the longer version). India, Singapore and Hong Kong tilt in the opposite direction, with opinion more evenly divided elsewhere.

Given the following list of audit report attributes:
 Auditors’ responsibilities
 Directors’ responsibilities

Adequacy of accounting records

Quality of financial information

Quality of non-financial information

Certain other items that may be reported by auditors to audit committees respondents across the countries indicated that quality of financial information would be the most important matter to be covered if audit reports increased in length.
Currently investors do not weigh heavily environmental performance indicators as a source of information when making investment decisions, but two-thirds do see the information provided by environmental performance reporting to become more important over the next 10 years – and hardly any say it will be less important. China, Hong Kong and France have the most widespread agreement on this.
Seven in 10 (71%) agree that a globally consistent set of standards would improve environmental reporting, a strong level of endorsement. However, there are wide variations in the level of agreement, for example between Germany, US and Singapore – with support around the 60% level – and France, China and India where it is in the mid-80% level.
Respondents were asked suggestions on how corporate reporting can be made more transparent and easier for users to understand without resorting to excessive disclosure to which the most common suggestion was consistency/ standardisation of the report layout (11%). Corporate reporting is affected by accounting and auditing standards and so, it does, to some extent, comprise of financial reporting which is intriguing because the second most common response was for more disclosure of off-balance sheet entities (6%), and not for more disclosure of accounts as a whole. Also surprising is that over a quarter of respondents could not make a suggestion for improving transparency without resorting to excessive disclosure.
Opinion is divided on the topic of people have expressing concerns that corporate reporting has become too voluminous, resulting in a lack of clarity and useful information for investors. Though just under half agree that reports have become too voluminous, a third do not. Agreement is highest in France and Germany
– this may be in part to a reaction to perceptions of the work of
International Accounting Standards Board (IASB) expressed elsewhere by those countries.
Whilst many investors struggle to identify specific information that could be dropped, some make very specific suggestions such as dropping information on accounting standards and dropping corporate governance/share ownership information.
Very few respondents say the amount of disclosure around the existence and management of risk in corporate reports is currently too high but over half consider it to be too little. When looking at responses with regards to IFRS, there is very little difference between IFRS and non-IFRS countries.
Four out of ten respondents who would like to see more disclosure indicate they would like it to be in the areas of financial/currency/investment/debt risk. Among the few Japanese investors indicating the amount of disclosure around the existence and management of risk in corporate reports was too little, there were even fewer who could provide areas in which more disclosure was

necessary. This is in sharp contrast to French and German investors who provide feedback on various areas for increased disclosure.
Internal controls can be wide ranging and cover the whole of an enterprise. Half of those interviewed are primarily concerned with all internal controls, while four in ten mention internal financial controls specifically. Financial controls are seen as more important than internal controls overall in France and China, with French investors also concerned about controls over published financial reporting (joint first with Japan on the frequency with which this is mentioned).
Over half of the investors participating would support further debate on the scope of internal control reporting obligations and very few oppose such a reconsideration. In India, Singapore, Hong
Kong, and China, there was no opposition to this at all.
In general, investors are much less confident that companies risk management systems can identify and report to shareholders than to boards, an interesting finding given their position as
(potential or actual) shareholders.
With regards to mandatory independent assurance statements, again just over half would support mandatory independent assurance statements about aspects of co mpanies’ internal controls.
Opposition, whilst still limited, is concentrated in the US, UK and, to a lesser extent, France – arguably the markets with most experience of regulatory activity around internal control regimes.