February 2003

Building Public Trust: The Future of Corporate Reporting

Building Public Trust: The Future of Corporate Reporting
By Samuel A. DiPiazza, Jr., and Robert G. Eccles
John Wiley & Sons, Inc., 2002; $24.95;
ISBN: 0-471-26151-3
Reviewed by Robert Kawa

In their prologue, the authors state that Building Public Trust offers a vision of the future of corporate reporting and a mission of spurring action toward reforms that will build public trust. The book most certainly encourages the reader to think of ways in which to strengthen the value of information to be produced and analyzed in closing the information gap between companies and investors.

DiPiazza is CEO of Pricewaterhouse-Coopers, and Eccles is president of Advisory Capital Partners, which provides financial advisory and transaction services and makes private equity investments. Together they believe that to truly achieve transparent corporate reporting, all participants in what they call the “corporate reporting supply chain”—company executives, boards of directors, independent auditors, information distributors, third-party analysts, and investors/stakeholders—have responsibility for making this type of reporting achievable.

The authors propose a three-tiered model of corporate transparency. In the first tier, they call for global GAAP as the basis of reporting. The second tier is based on industry standards developed by voluntary participants to improve measuring and reporting information. The third tier calls for added reporting of company-specific information, such as strategic plans, risk management, and corporate governance.

In addition to global GAAP, the authors call for global GAAS and continuous auditing, not only of the tier one–based financial statements, but also at the levels of tiers two and three.

They also think that the format in which the content of information is communicated is essential to transparency. Because of the shift to Internet reporting and the demand for more-timely, higher-quality information, they believe that Extensible Business Reporting Language (XBRL) needs to be adopted. The authors insist that although XBRL is still in its infant stages it will provide the information needed by all parties of the corporate reporting supply chain in a highly efficient manner.

Although this book was written at the time of the Enron crisis, it does not address the perceived conflict of auditor independence and the balance between auditing and consulting services, a problem that truly came to the public’s attention during the Enron fiasco.

The authors offer sound solutions to raising the quality of corporate reporting in order to help win back the public trust in the information being produced and reported to users. Some of their solutions, like global GAAP, are years away, if achievable at all. They make their case that these solutions are needed now. In light of the crisis in the accounting profession, reform cannot come soon enough.

Robert Kawa, CPA, is an assistant professor of accounting at LeMoyne College, Syracuse, N.Y., and is the technical standards subcommittee chair of the NYSSCPA Professional Ethics Committee.
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