The Financial Reporting Council (FRC) today issued a consultation document on the Turnbull guidance on internal control.

The FRC is seeking views on the effectiveness of the guidance, in what ways it may need to be updated, and what information companies should be asked to disclose to their shareholders.  If changes are proposed as a result, there will be a second consultation on draft revised guidance in mid-2005.  The intention is that any revised guidance to directors will take effect for accounting periods commencing on or after 1 January 2006. 

Launching the consultation, Douglas Flint, Group Finance Director of HSBC Holdings plc and chairman of the group reviewing the guidance on behalf of the FRC, said:

”Risk is an integral part of business. Improvements in company performance and greater returns for investors are a direct result of measured and successful risk-taking.  But in order to reap these rewards companies need to understand the nature and extent of the risks to which they are exposed, and manage these within a sound system of internal control.  That is why the Turnbull guidance is relevant to everyone who benefits from better business performance.

“We want to hear evidence of how well the guidance has worked and views on how it might be improved.  At the end of the review we want to have guidance that is robust, up to date and enjoys broad support from boards and investors, so I would encourage everyone with an interest in better business performance to take part in this consultation.” 

The consultation period runs until 2 March 2005.

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.                 Published in 1999, the Turnbull guidance sets out best practice on internal control for UK listed companies, and is used to demonstrate compliance with the internal control requirements of the Combined Code on Corporate Governance.

3.                 In July 2004 the FRC set up a group lead by Douglas Flint to review the guidance in the light of experience in implementing the guidance and developments in the UK and internationally since 1999, and to update it where necessary. The group includes representatives from business, the investment community and the accountancy profession. The review team will report to the FRC Council, which will be responsible for approving any revisions to the guidance.

4.                 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 1999, 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”.

5.                 Copies of the consultation document and the current Turnbull guidance can be downloaded from www.frc.org.uk/corporate.cfm.  Responses to the consultation should be sent to turnbullreview@frc.org.uk.

6.                 All Press enquiries should be directed to: Chris Hodge on Tel: 020 7295 5815 (until 3 December 2004) or 020 7492 2381  (from 6 December 2004) or E-mail: c.hodge@frc.org.uk.

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