3 Sep 2013

Guide aims to demystify investment speak

7:53 am on 3 September 2013

Investors need to be more sceptical when it comes to making financial decisions, an Australian accounting body says.

CPA Australia believes investors should not depend exclusively on advisors and regulators to look after their financial interests and has launched a guide to understanding audit reports as part of Money Week, to help improve New Zealanders' financial literacy.

A Guide to Understanding Auditing and Assurance aims to help so-called "mum and dad investors", as well as younger people, better understand what auditors are really saying about a company's financial statements.

CPA Australia country manager for New Zealand David Jenkins said it would help investors take more responsibility for their finances.

"They need to have a stronger sense of financial literacy and being able to understand what financial statements mean, that's the most important thing," he said.

"Auditors are trained to be professional sceptics and they're trained to ask the hard questions, and that's why we use auditors, to help us understand financial statements.

"Mum and dad investors also need to be aware of what their advice actually means, because obviously there's this jargon, and it's being able to interpret that effectively."

The guide explained the difference between such terms as "reasonable level of assurance" and "limited assurance", and spelt out what that actually meant, Mr Jenkins said.

"It's those sorts of words and vocabulary that we've tried to define, and I think that's going to help people when they read through these reports," he said.

However, he did not believe auditors needed to use plainer language when writing reports, saying inexperienced investors needed to take control themselves and actually find out what the terms meant.

Copies of the guide are on CPA Australia's website.