Introduction

It has been argued that the need to consider the objectives of audited accounts ‘is not purely the task of the accounting profession; it is central to company law’. The relevance o5f audited financial accounts to company law lies in their contribution to corporate governance by providing a facility for judging the stewardship of the managers at least from the perspective of their effect on the company's financial position. Indeed, a major feature of the ‘disclosure philosophy’ is the requirement for companies to produce audited accounts and to make these available to their members and debenture holders and also to the public by delivering them to the registrar of companies. The most recognised purposes of these accounts are to enable shareholders and others to make economic decisions and to judge the managers' use of resources.

The financial reporting aspects of disclosure also comprise the most developed area of disclosure obligations. The chapter on the regulatory structure demonstrated that financial reporting requirements exist in a combination of statutory provisions, shaped by European Directives, and professional accounting standards issued by the Accounting Standards Board. This chapter will provide a brief outline of the financial reporting requirements before considering their effectiveness in the light of their objectives and communication quality.