Corporate Annual Report Graphical Communication in Hong Kong: Effective or Misleading?

Abstract

Graphical presentation of quantitative data within corporate annual reports has become one of the techniques used by management to disclose quantitative information. The purposes of the paper are (a) to review the normative advan tages and limitations of graphs in corporate reporting, and (b) to extend our knowledge about the presentation of annual report chart graphics by examining Asian (Hong Kong) data. Two surveys of chart graphics were undertaken: 140 annual reports for 1992-1993 and 114 for 1994-1995. It was found that 38% and 35% of companies respectively for each of the two time periods include chart graphics. However, the second survey found the surprising and disturbing result that the construction techniques used in approximately half of all graphs violate sound principles and are therefore misleading. Because misleading graphs occur across all industrial sectors, violations may be the result of preparer ignorance and carelessness rather than wilful manipulation to deceive. Without objective evidence about this, professional management and accountancy organizations probably need not yet draft construction guidelines for annual report preparers.

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