Nonfinancial reporting, integrated reporting, holistic reporting, or enhanced reporting—although there’s no single, agreed-upon name for this type of reporting (even among the editors of this magazine), stakeholders and investors agree on the need for more comprehensive reporting that goes beyond the financial health of the organization.
According to The IIA Global Perspectives and Insights report, Beyond the Numbers: Internal Audit’s Role in Nonfinancial Reporting, this type of reporting “fills the void by reporting quantitative and qualitative information that falls outside the scope of mainstream financial statements.” In this month’s cover story, “Taking the Lead on Nonfinancial Reporting,” author Arthur Piper considers the disclosure of nonfinancial information and the leading role internal audit can play because of its knowledge of the organization.
The nonfinancial reporting movement appears to be slightly further along in Europe than in other parts of the world. By December, governments across Europe will need to have translated the European Union’s 2014 Directive on nonfinancial reporting into their national rule books. The directive requires organizations to disclose information on environmental issues, social and employee-related matters, respect for human rights, and anti-corruption and bribery. And although the terminology may not yet have caught on in the U.S., Jim Pelletier, The IIA’s vice president of Professional Solutions, points out in the cover story that internal auditors who are taking a risk-based approach and are looking at the major objectives of the organization are likely to be addressing nonfinancial areas.