Confidence Accounting is a proposal to use distributions, rather than discrete values, where appropriate in auditing and accounting. In a world of Confidence Accounting, the end results of audits would be presentations of distributions for major entries in the profit & loss, balance sheet and cashflow statements. The proposed benefits of Confidence Accounting include a fairer representation of financial results, reduced footnotes, more measurable audit quality and a mitigation of mark-to-market perturbations. The landmark, free-to-download report was published on 5 July 2012 (press release):
Andy Haldane, Executive Director for Financial Stability at the Bank of England welcomes the proposal and writes in the foreword, “My hope is that this proposal moves our thinking a step closer towards a set of accounting standards for major entities that put systemic stability centre stage. In the light of the crisis, anything less than a radical re-think would be negligent.”
Responses to the July 2012 report are available online. The publication included a invitation to readers to comment on the content of the proposal. A questionnaire was circulated during events and was also available online. Read the Confidence Accounting Consultation Responses for more information.
For a quick introduction to Confidence Accounting, particularly its application to banking, in 2011 the CISI published “Accounting for Confidence” which provides a short overview. Confidence Accounting was introduced for the non-professional in “The Price of Fish: A New Approach to Wicked Economics and Better Decisions”, winner of the 2012 Independent Publisher Book Awards Finance, Investment & Economics Gold Prize.