Sometimes the old can learn from the young. Compared with century-old
financial auditing, social auditing is a pup, a distinct discipline
only since the 1970s. Yet, though still felt to be lacking rigour and
professional standards, social auditing might be about to prove its
usefulness to business.
If the present system for assessing the value of companies is bust, as
the heads of the six biggest financial auditing firms say (see page
one), what will replace it? Their vision explicitly demands information
of the sort found in non-financial reports be given much greater weight.
These heads of firm have serious clout. Their statement may be
self-serving, but they are calling for a global conversation involving
all stakeholders. Having triggered the debate, they will not be able to
control it. This is a huge opportunity for advocates of corporate
social responsibility. The character of the discussion will depend
largely on the social auditing profession’s ability to make a
high-quality input. Will it meet the challenge?
People are still waiting for social reports to look more like financial
reports: more comparable figures, more order, and more generally agreed
principles. These remain urgent priorities. Nevertheless, financial
auditors recognize they must take some leaves out of the social
auditors’ book.
A key theme of their statement is the need to focus on the process of
recording business information rather than on the static formats in
which financial data is currently presented. Social auditors have
experience in this area, having developed and implemented standards for
stakeholder dialogue and other procedures which by their nature are
process-driven.
Then there is assurance. A financial statement either complies with
accounting standards or it does not. Non-financial reports often come
in shades of grey. Assurers of social reports are used to giving
nuanced opinions about the information presented and to making
qualitative judgements in assurance statements. Their knowledge will be
essential to reform reporting as envisioned by the heads of the Big Six
accounting firms. Furthermore, their assurance statements are
forward-looking – another crucial area in which financial auditors, who
spend their time looking in the rear-view mirror, can learn from their
social auditor peers.
More real-time reporting of business information will provide a further
shot in the arm for CSR. Forecasts of quarterly earnings will become
less relevant, leaving company managements to pursue the long-term
strategies CSR can most effectively support.
Social auditors and assurers need to come out of the closet now. So do
the companies at the leading edge of social reporting. For a successful
overhaul of the accounting system, the financial auditors must learn
from the social auditors. Time will tell whether both are up to this
historic task.
