Accountants’ reports on profit forecasts: regulation and practice

Niamh Brennan (Michael MacCormac Professor of Management, University College Dublin, Ireland )
Sidney J. Gray (Professor of International Business, University of New South Wales, Australia)

Managerial Auditing Journal

ISSN: 0268-6902

Publication date: 1 December 2000

Abstract

Profit forecasts are rarely disclosed in the UK except in prospectuses, circulars and during takeover bids. There are few regulations governing the content of profit forecasts. Under stock exchange rules these forecasts must be reported on by both reporting accountants and the merchant bankers advising on the deal. The format of the forecasts is at the discretion of individual companies. This paper summarises the regulations, including professional pronouncements, governing accountants’ reports on profit forecasts. Practical examples of such accountants’ reports extracted from 250 profit forecasts published during 701 UK takeover bids in the period 1988 to 1992 are reproduced and discussed. These examples provide useful precedent material for practitioners involved in reporting on a profit forecast. The paper concludes with a discussion of policy issues and suggestions for policy makers.

Keywords

Citation

Brennan, N. and Gray, S. (2000), "Accountants’ reports on profit forecasts: regulation and practice", Managerial Auditing Journal, Vol. 15 No. 9, pp. 447-458. https://doi.org/10.1108/02686900010356923

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Publisher

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MCB UP Ltd

Copyright © 2000, MCB UP Limited

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