Auditors have become increasingly sensitive to the completeness of financial statement disclosures, especially in the areas of potential commitments for which a company may be liable. The problem for company management is that the employees who may be creating these commitments (especially in the purchasing and legal departments) probably have no idea that their activities require disclosure. This is less of a problem in smaller, centralized companies where informal communication channels keep everyone apprised of ongoing activities, but can be a significant problem in larger firms where employees are widely distributed and communication systems are accordingly more difficult to maintain.
A solution is to assemble a disclosure committee, made up of representatives from every department whose employees are likely to create transactions requiring some form of disclosure. This group does not have to meet in person very frequently, but they should be encouraged to share information at regular intervals regarding their departments’ activities. Further, every member of the group should be kept up to date by the accounting staff regarding changes in disclosure requirements, as well as the details of the disclosures currently being made. This approach not only improves the comprehensiveness of disclosures, but is also useful for correcting and updating existing disclosures.