New research from Deakin University indicates that, despite some advancements, many of Australia's largest listed companies still fall short of expectations for transparency and integrity in shareholder reporting.
Efforts to enhance accountability in corporate disclosures encounter notable challenges. In 2023, the Deakin Sustainable Business Centre examined the responses of ASX 300 companies to the ASX’s 2021 guidelines, which call for disclosures on the verification of unaudited reports – including cash flow statements, financial reports, sustainability disclosures and modern slavery statements.
In 2023, 84% of ASX 300 companies disclosed at least one integrity mechanism; however, a notable minority did not meet standards. Disturbingly, 10% made no disclosures, while 4% used generic, boilerplate information.
Among those that did disclose, there were significant quality disparities. Over half (62%) did not specify which reports were verified, and one-third (36%) lacked board oversight for unaudited disclosures. Few companies revealed external (9%) or internal (3%) audit reviews.
Larger companies typically had stronger internal controls, while smaller firms often depended solely on senior executives for report reviews.
The research also highlighted industry differences: consumer staples, healthcare and communication services showed better disclosure quality, whereas energy and utilities fell significantly behind.
Professor Peter Carey, Director of the Deakin Sustainable Business Centre, expressed concern over the findings, especially in light of the ongoing push for companies to adopt more robust and credible reporting mechanisms.
‘Over many years, we’ve seen some high-profile cases where large, listed companies have fallen short of community standards and expectations in terms of transparency,’ Professor Carey said.
‘These findings suggest the ASX should strengthen its surveillance and oversight of companies’ compliance with ASX corporate governance principles.
‘While we’ve seen positive steps forward, there is considerable room for improvement in ensuring stakeholders can trust in the integrity of unaudited company disclosures.
‘Companies should specify the reports subject to review and the board should always acknowledge responsibility for the integrity of unaudited disclosures.’
Investors deserve clear, specific information on how unaudited reports are verified
Professor Peter Carey
Director of the Deakin Sustainable Business Centre
Professor Carey highlighted the critical role of trust in corporate reporting.
‘When companies provide detailed, entity-specific disclosures that explain the controls used, it shows they are taking their responsibilities seriously and means that investors can rely on that information.’
He also welcomed a proposal aimed at addressing the low rates of external assurance in the upcoming edition of the ASX Corporate Governance Council Principles and Recommendations, due for release in early 2025.
‘This amendment will enable much more effective oversight, to enhance transparency in areas that are vital for informed investment decisions,’ he said.
Deakin's recent research indicates that numerous ASX 300 companies fall short of transparency expectations. Enhancing credibility of unaudited reports requires clearer disclosures, stronger board oversight and increased audit usage to align with global best practices.
The research highlights key trends in the verification of unaudited reports among ASX 300 companies:
The report outlined three key actions to improve reporting integrity:
