The Financial Reporting Council today confirmed the expected review of the continued appropriateness of the Turnbull guidance on internal control and risk management, which was published in 1999.

 

The review will start later in the year, and the intention is that revised guidance to directors will take effect for accounting periods commencing on or after 1 January 2006.  The review will include full consultation on any proposals to revise the guidance.

 

The review will be chaired by Douglas Flint, Group Finance Director of HSBC Holdings plc. Mr Flint was a member of the working party that produced the Turnbull guidance.

 

Announcing the review Sir Bryan Nicholson, chairman of the Financial Reporting Council, said:

 

“The Turnbull guidance continues to provide a good framework for boards to ensure they have a sound system of internal control. There have been developments in the UK and internationally since it was published, and it is now an appropriate time to review the guidance and make sure that it remains relevant.” 

 

Douglas Flint said:

 

“Having been part of the team that developed the Turnbull guidance, I am delighted to have been asked to lead this review. The original objective of the guidance was to help companies manage risk effectively as part of their fulfilment of their business objectives and in recognition of their duty to safeguard shareholders’ investment and the company’s assets. That objective is as important today as it has ever been; indeed perhaps more so as there is increased public interest in demonstrating that public investment markets deserve the trust of those who allocate savings to investing in such markets.” 

1.                  The Financial Reporting Council (FRC) is a unified, independent regulator.  Its mission is to promote confidence in corporate reporting and governance.  The FRC incorporates five subsidiary boards: the Accounting Standards Board, the Auditing Practices Board, the Financial Reporting Review Panel, the Accountancy Discipline and Investigation Board and the Professional Oversight Board for Accountancy.

 

2.                   The terms of reference for the review are:

 

“To review and update where necessary the Turnbull guidance, in the light of experience in implementing the guidance and developments in the UK and internationally since 1999, to ensure that it continues to meet its original objectives, which were that it should:

 

·         reflect sound business practice whereby internal control and risk management are embedded in the business processes by which a company pursues its objectives;

·         remain relevant over time in the continually evolving business environment; and

·         enable each company to apply the guidance in a manner which takes account of its particular circumstances.

 

To publish the revised guidance in time for it to take effect for accounting periods commencing on or after 1 January 2006.”

 

3.                   Principle C.2 of the Combined Code on Corporate Governance states: “The board should continue to maintain a sound system of internal control to safeguard shareholders’ investment and the company’s assets”. Provision C.2.1 states: “The board should, at least annually, conduct a review of the effectiveness of the group’s system of internal controls and should report to shareholders that they have done so. The review should cover all material controls, including financial, operational and compliance controls and risk management systems.”

 

4.                   In addition to, and in advance of, the full review, a sub-group of the review team will issue by the end of 2004 a guidance note for SEC registrant companies on use of the existing Turnbull guidance as an approved framework for the purposes of compliance with section 404(A) of the US Sarbanes-Oxley Act. 

 

5.                  Douglas Flint joined HSBC Holdings plc as Group Finance Director in 1995.   He began his career with Peat Marwick Mitchell & Co (now KPMG) where he trained as a chartered accountant, and was appointed a partner of the firm in 1988.  Mr Flint is a member of the Accounting Standards Board in the UK and sits on the Standards Advisory Council of the International Accounting Standards Board. He was a member of the group that produced the Turnbull guidance in 1998, and also served on the US Federal Reserve Board’s Working Group on Public Disclosure in 2000.   In 2003 he co-chaired with Gerald Corrigan the Group of Thirty report “Enhancing Public Confidence in Financial Reporting”.

 

6.                      The other members of the review team are:

 

Stuart Bridges               Group Finance Director, Hiscox plc

John Coombe                Chief Finance Officer, GlaxoSmithKline plc

Michael Hughes             UK Chairman of Audit, KPMG

Rosemary Martin           General Counsel and Company Secretary,

Reuters Group plc

Michael McLintock         Chief Executive, M&G

John Mew                      Executive Partner, Grant Thornton UK LLP

Graham Pimlott             Non-Executive Director, Tesco plc

Alec Richmond              Head of Group Audit, Cadbury Schweppes plc

Paul Walsh                   Chief Executive Officer, Diageo plc

Tony Watson                 Chief Executive, Hermes Pension Management Ltd

 

Robert Hodgkinson         Secretary (ICAEW)

Jonathan Hunt               Assistant Secretary (ICAEW)

 

Observers

 

Chris Hodge                  Financial Reporting Council

Stephen Spivey              Department of Trade and Industry

 

7.                   The review team will report to the FRC Council, which will be responsible for approving any revisions to the guidance.

 

8.                   The Institute of Chartered Accountants in England & Wales will provide project management support to the review team, as was the case for the original Turnbull report.

 

9.                   All Press enquires should be directed to: Chris Hodge on Tel: 020 7295 5815 or E-mail: c.hodge@frc.org.uk.

 

  

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