Interconnections in Law, Accounting and Tax
Edited by Marijn van Daelen and Christoph Van der Elst
Chapter 2: Risk Management from an Accounting Perspective
2. Risk management from an accounting perspective Arco van de Ven DEVELOPMENT OF RISK MANAGEMENT AND ACCOUNTING Introduction 2.1 2.1.1 The history of risk management and accounting is a story of transparency, standardization and attestation. The risks to which these requirements are applied and their form have changed over the years. Transparency, standardization and attestation have been recurring topics, which have been put forward as means to reduce the risk of misappropriation of corporate funds, misstatement of financial reports or the risk of ineffective and inefficient controls or too-risky strategies. Transparency, in the form of disclosing accounting information, has given shareholders insight into the financial affairs of the company. Accounting regulation has been made over time to force management to disclose financial information. In the 17th century the Dutch East India Company (VOC) was forced by shareholders to publish balance sheet statements and profit and loss statements. Over the years, the call for transparency of financial figures has evolved into a demand for disclosure of company specific information. Companies nowadays not only have to give an insight into their financial affairs, they also have to be transparent about the effectiveness of their internal control systems, their risk appetite and which risks their organization faces. The call for transparency implies independent audits. How do stakeholders know that the companies information can be relied upon? Reports alone are not enough; they have to be attested. The need for independent attestation to assure the reliability of information has led to an increasing reliance...
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