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ICAS publishes guidance on assurance over KPI reporting

  • ICAS (Institute of Chartered Accountants of Scotland) (lt green) Image

19 Jun 2015

The Institute of Chartered Accountants in Scotland (ICAS) has published guidance on the provision of greater assurance and transparency in KPI reporting. The guidance has been published against the backdrop of increased scrutiny of non-financial reporting in a company’s annual report of which KPIs are one element. The objective of the guidance is to enable audit committees and boards to provide users of financial statements with greater insight and understanding into the reliability, relevance and credibility of KPIs included within a company’s annual report.

The guidance has been developed by a working group including representatives from the Big Four accounting firms, investors, preparers, audit committees and internal auditors.  The working group considered whether it was possible to extend the assurance provided over KPIs included within an annual report and what guidance was required in order to help audit committees and boards achieve this. 

The guidance therefore seeks to assist audit committees and boards in the selection of suitable KPIs for their company by setting out some characteristics and criteria that may be applied when considering individual KPIs.  It also provides an ‘Assurance Matrix’ which sets out five different sources of assurance that might be obtained over each KPI.

It is intended that the guidance will help audit committees and boards to:

  • challenge the relevance of the company’s KPIs by ensuring that they are relevant to the company’s strategic objectives and user needs;
  • compare the source of assurance obtained over each KPI against what users expect and desire;
  • communicate the sources of assurance obtained over the KPIs to enhance users’ understanding of the assurance process; and
  • communicate with users to ensure that the level of assurance obtained over KPIs is what the user expects and desires.

ICAS comments that “audit committees/boards should use this guidance to help them communicate to users the degree of confidence they have obtained over the relevance and reliability of the KPIs and the process undergone to acquire this confidence”.

The press release and full report are available on the ICAS website.

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