Financial Fundamentals for Directors, 2nd Edition

Many directors in Australia are concerned that it is becoming more difficult for them to deal with the growing complexity of financial statements. 

These concerns are further fuelled by milestone legal decisions, not the least of which is still the Centro case that confirmed, among other things, that directors cannot delegate to the audit committee and others their responsibility for approving the statutory financial reports. The decisions in Banksia are more recent examples. Directors must read the financial statements and consider whether the disclosures they contain are consistent with the director’s own knowledge of the company’s affairs.

It is not necessary for all directors to be financial experts, however they must be sufficiently financially literate to satisfy themselves that they understand the results and financial position of the business and are able to fulfil their statutory obligations. Importantly, they need to know when to ask for expert advice.

A company’s strategies, business activities, risk mitigation and relationships are captured and explained in the financial statements, both in the numbers reported and in the disclosure notes. As each of these factors evolve and change, the ‘story’ told in the financial statements will also evolve and change.

S. Dianne Azoor Hughes’ thoroughly updated new edition, Financial Fundamentals for Directors 2nd edition, aims to help directors better understand financial reports and improve their financial literacy. This financial literacy not only helps directors with their governance obligations, but it also helps them better understand their organisation’s financial story, which in turn leads to better risk and strategy decision making.