Content of published annual reports 5

	management
	Accounting: Content of published annual reports

'Looking ahead, I am confident that our Medical and Industrial businesses will continue to increase their contribution to profits, and that we have positioned our Aerospace interests to benefit from the next upturn in that industry....'

The chairman's and directors' reports will give a good indication whether any major changes have occurred which might make direct comparison between the past and present financial results misleading. The chairman's statement is most likely to give an indication of the company's future prospects and strategy. Often the chairman may quote figures or use phrases that can be used to estimate fairly accurately likely future financial results. Of course these reports will try to emphasise the best aspects and may omit rather than distort the worst aspects of a company's performance or prospects.

The Auditors' Report

Auditors must report to the shareholders their opinion on whether proper accounting records have been maintained and that the accounts show a 'true and fair view' of the company's financial situation. These reports are normally 'clean' giving no cause for concern, but they may be 'qualified' where auditors are not entirely satisfied with the information available or the way it has been disclosed. Qualifications may range from minor differences of opinion about how an accounting standard should be interpreted to major problems verifying the accuracy or completeness of the information in the accounts. Auditors may face conflicting interests where the value of audit work (and consultancy work which often goes with it) is very large. High standards of professional integrity are required!