The Financial Reporting Council (‘FRC’) has written to Mr John McFall, Chairman of the House of Commons Treasury Committee to inform the Committee of the steps which it has taken in connection with the Committee’s Ninth report of Session 2009-09 “Banking Crisis: reforming corporate governance and pay in the City”. The report contains a number of recommendations which are either expressly addressed to the Financial Reporting Council or one of its operating bodies or deals with matters which are within our responsibilities.

Paul Boyle, FRC Chief Executive, said:

“The Treasury Committee made a number of significant recommendations in relation to corporate governance, corporate reporting and auditing. We welcome their interest in our work and we hope that publication of our response to the Committee’s Report will be helpful to our stakeholders in understanding the steps we have taken or are taking in relation to the matters within the scope of the FRC’s responsibilities.”

The main points made in the letter to Mr McFall include:

• During its current review of the Combined Code on corporate governance the FRC has been working closely with Sir David Walker who has been reviewing the corporate governance of banks and other financial institutions (‘BOFIs’). The FRC has sought views as to the extent to which Sir David’s draft recommendations for BOFIs should be incorporated into the Code.
• The FRC has work underway in relation to a number of the issues raised by the Committee on the work of auditors. Specifically the Auditing Practices Board has initiated a consultation on the provision by auditors of non-audit services to their audit clients. The FRC is also continuing its work on mitigating the risks posed by the degree of concentration in the audit market.
• The FRC has also completed or initiated work dealing with a number of the Committee’s recommendations on corporate reporting. The FRC has recently finalised update Guidance for Directors on Going Concern and Liquidity Risk and earlier this year it launched a discussion paper (“Louder Than Words”) on the complexity and relevance of corporate reports. A review of narrative reporting recently published by the Accounting Standards Board highlighted the importance of companies articulating clearly their business models.

1. The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance. Its functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy and Actuarial Discipline Board) and by the FRC Board. The Committee on Corporate Governance assists the Board in its work on corporate governance.
2. The House of Commons Treasury Committee’s Ninth report of Session 2009-09 “Banking Crisis: reforming corporate governance and pay in the City” is available at http://www.publications.parliament.uk/pa/cm200809/cmselect/cmtreasy/519/51902.htm  
3. Details of the FRC’s 2009 review of the Combined Code on Corporate Governance are at http://www.frc.org.uk/corporate/reviewCombined.cfm.
4. Details of the APB’s review of the provision by auditors of non-audit services to their audit clients are at http://www.frc.org.uk/apb/press/pub2125.html. Details of the FRC’s continuing work on mitigating the risks posed by the degree of concentration in the audit market are at http://www.frc.org.uk/press/pub2146.html.
5. The FRC’s updated Guidance for Directors on Going Concern and Liquidity Risk is at http://www.frc.org.uk/corporate/goingconcern.cfm. The discussion paper (“Louder Than Words”) on the complexity and relevance of corporate reports is at http://www.frc.org.uk/press/pub1994.html . The FRC’s review of narrative reporting is at http://www.frc.org.uk/asb/press/pub2148.html. 
6. All Press enquiries should be addressed to David Andrews on 020 7492 2382.