Financial Reporting Review Panel

Financial Reporting Review Panel to gain increased powers and to
co-operate with the Financial Services Authority and the Inland Revenue

FRRP PN 83

06 April 2005

Related Documents

	Memorandum of Understanding

	Operating Procedures


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The Financial Reporting Review Panel ('the Panel') today published a memorandum of understanding with the Financial Services Authority under which the Panel will co-operate closely with the Financial Services Authority in enquiries into listed companies.

The Panel is also finalizing a memorandum of understanding with the Inland Revenue under which the Inland Revenue may disclose information to the Panel regarding companies? accounts.

These steps coincide with the grant to the Panel of additional powers under the Companies (Audit, Investigations and Community Enterprise) Act 2004. From 6th April 2005 the Panel will have statutory power to require companies, directors and auditors to provide documents, information and explanations if it appears to the Panel that there is, or may be, a question whether accounts comply with relevant reporting requirements.

The Panel is publishing revised operating procedures to take account of these changes.

FSA

Under the Companies (Audit, Investigations and Community Enterprise) Act 2004 the Panel will, from 6th April, have responsibility to keep under review reports issued under listing rules. This extends the Panel?s remit to cover interim as well as annual accounts and will also cover accounts issued by UK issuers which are not companies and by some non-UK companies. The Panel will inform the Financial Services Authority of its findings and both bodies will co-operate over action to be taken.

These measures are a significant step in ensuring the co-ordination of accounting enforcement activities in the United Kingdom for which the Panel and FSA share responsibility, so as to comply with standards set by the Committee of European Securities Regulators.

Inland Revenue

Under the Companies (Audit, Investigations and Community Enterprise) Act 2004 the Inland Revenue is authorised to disclose information regarding company accounts to the Panel to assist the Panel in the discharge of its statutory responsibilities. The memorandum of understanding, which is currently the subject of consultation, will set out the procedures to be followed and will apply in respect of accounting periods ending after 6th April 2005.

Operation by Agreement

Announcing the changes, the Panel Chairman, Bill Knight said:

"These changes increase the Panel's authority, but we know that the best regulation is by agreement, and that is what we will try to achieve. Every business which prepares accounts also uses them, and it is in all our interests to make sure that the system of regulation works and that accounts continue to be true and fair."

Notes to Editors

The Financial Reporting Review Panel (FRRP) is part of the Financial Reporting Council (FRC), whose mission is to promote confidence in corporate reporting and governance. The FRC has five operating bodies; the Accounting Standards Board, the Auditing Practices Board, the Financial Reporting Review Panel, the Accountancy Investigation and Discipline Board and the Professional Oversight Board for Accountancy.
The role of the Panel is to examine the annual accounts of public and large private companies to see whether they comply with the requirements of the Companies Act 1985 ('the Act'), including applicable accounting standards. Following implementation of the Accounting Regulation (EC) No. 1606/2002, this may mean compliance with UK or International Financial Reporting Standards.
Where breaches of the Act are discovered the Panel seeks to take corrective action that is proportionate to the nature and effect of the defects, taking account of market and user needs. Where a company's accounts are defective in a material respect the Panel will, wherever possible, try to secure their revision by voluntary means, but if this approach fails the Panel is empowered to make an application to the court under section 245B of the Companies Act 1985 for a order for revision. To date no court applications have been made.
From 6^th April 2005 the Panel is also appointed to keep under review periodic accounts and reports that are produced by certain listed issuers that are required to comply with accounting requirements imposed by the Listing Rules. The Panel has no authority to effect corrective action in respect of such reports but is committed to working with the FSA to ensure that proportionate action is taken in respect of discovered infringements.
The FRRP was established in 1991 as a reactive body to respond to matters drawn to its attention by complaints or published articles that raised a doubt whether annual accounts of public and large companies were prepared in compliance with the Companies Act 1985. Following Government recommendation, the Panel amended its operating procedures in October 2003 to allow it to adopt a proactive approach to the selection of companies and other entities for review.
The Panel's revised operating procedures and memorandum of understanding are published today on the Panel's web-site at www.frc.org.uk/frrp/.
The Chairman of the Panel is Bill Knight and the Deputy Chairman Ian Brindle FCA. There are currently 22 other Panel members drawn from a broad spectrum of commerce and the professions. Individual cases are normally dealt with by specially constituted Groups of 5 or more members.
All Press enquiries should be directed to: Carol Page on Tel: 020 7492 2460 or email: c.page@frc-frrp.org.uk

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