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Annual Report 2006/07

Contents

One - Chair's Statement

The FRC's Work

The FRC's remit is to define high standards in corporate governance, reporting, auditing and actuarial practice; to be concerned with the application of those standards in practice; and to work with the accountancy and actuarial professions to promote the professionalism of their members.

Fulfilment of this remit is substantially a matter of thought leadership and influencing practitioners. "Success" is difficult to define and measure and is seldom to the credit of the FRC alone. The FRC's task would be impossible without extensive and continuous contact with practitioners.

We have no doubt that our work makes a significant contribution to the healthy functioning of the UK market economy and is increasingly influential overseas. The nature and extent of this work in 2006/07 is well covered in the Chief Executive's Report.

The FRC's Governance

In the course of the year the FRC Board and Council, supported by Government, thoroughly reviewed the FRC's governance. Their conclusions were reported to Parliament and published by the FRC on 29 March, along with a Consultation Paper, available at: www.frc.org.uk/publications/pubs.cfm.

Since the considerable enlargement of its remit in 2004, the FRC has been evaluating the effectiveness of its organisation with three particular objectives in mind. The first is to make the most of the interconnections between the various parts of the FRC's remit while preserving appropriate autonomy for the Operating Bodies. The second is to have governance arrangements which are clear and well able to provide challenge and focus to the FRC's strategy and priorities, while being credibly independent of any particular stakeholder bias. The third is for the FRC to be appropriately accountable and credible as a national regulator notwithstanding its necessarily close working relationships with market practitioners.

The main features of the published proposals are that:-

  • The Board and Council will be merged into a single governing body – the new Board, comprising 16 members in total
  • The Chairs of the Operating Bodies will be members of the new Board
  • The non-executive members, plus the Chairman and the Deputy Chairman, will form a majority of the new Board
  • Only the Chair and Deputy Chair will in future be appointed by Ministers.

Members of the new Board will be appointed on their individual merits rather than as representatives of particular interests. The intention is that they should bring to the table a very wide practical experience in reporting and governance, as well as intra-professional understanding, international knowledge and experience, and diversity. The new Board will have a Committee on Corporate Governance, as the Council does at present, which may include members drawn from outside the Board. Appointments will be made in line with the principles set by the Office of the Commissioner of Public Appointments. There will be a Temporary Nominations Committee to manage the transition from the present structure to the new Board.

The consultation period ends on 1 June and, subject to the consultation feedback and to final endorsement of the proposals by Government and Council, the Temporary Nominations Committee will then begin its work. It is hoped that the new Board will be fully in place by the end of 2007.

The Council

The Council met four times during the year and provided significant guidance on a number of major issues, including the development of our Strategic Framework and the proposed changes to our governance structure. My report on the work of the Council's Committee on Corporate Governance is on page

  1. I would like to record my thanks to the two members who departed from the Council during the year: Sir George Mathewson and Ed Sweeney.

The FRC's Staff and Market Support

I want to pay warm tribute to the hard work and skills of the FRC's staff. Their impact is powerfully reinforced by the leadership of the Chief Executive and the Chairs of the Operating Bodies and the indispensable help the FRC receives from the host of practitioners engaged in its Board and Council, the Operating Bodies and their committees, working parties and consultations generally. We are truly a market-led regulator and it is crucial to our effectiveness.

Looking Forward

The FRC, as I have said, is increasingly influential overseas and the engagement to secure this will inevitably strain further both our human and financial resources, even if it is kept to the minimum necessary to serve the UK's interests. We are planning as well as we can to take account of this and believe we will be helped considerably by the focus of our Strategic Framework and by the proposed changes in organisation. The UK is well placed to impact constructively the development of global markets and it is important that the FRC is equipped to play its own part in this endeavour and that it ensures it continues to be as well supported by its stakeholders in the future as it has been in the past.

Handwritten signature of Chris Thoff. Sir Christopher Hogg

Two – Chief Executive's Report

Introduction

This section of the Annual Report summarises the key issues which the FRC has worked on during 2006/07. I have covered these issues under four headings:

  • Delivering our 2006/07 commitments
  • Establishing a Strategic Framework for the FRC
  • Making the FRC a more capable organisation
  • Performance assessment.

Delivering our 2006/07 commitments

In our Plan & Budget for 2006/07 we explained that the key themes of our work were intended to be:

  • Lead public debate in the UK on the major issues affecting future confidence in corporate reporting and governance
  • Shift our resources from developing UK standards and guidance towards the development of high quality international standards and effective cross-border regulatory co-operation
  • Monitor corporate reporting and governance practices in the UK and take enforcement action where appropriate
  • Contribute to modifying the UK regulatory regime to take account of changes in European and UK legislation.

I believe that we can fairly claim to have met our commitments on each of these themes. I have summarised below the most important aspects of our work on these four themes. Further details of many of these projects can be found in the operating body reports in section Three. A summary report covering all of the major activities and projects which we undertook during 2006/07 can be found on the FRC website at: www.frc.org.uk/about/annual.cfm.

Public debate on the major issues affecting corporate reporting and governance

2006/07 was the year in which we commenced our new responsibilities for actuarial standards and regulation as a consequence of the acceptance by the Government of the recommendations of the Morris Review. Most of our work has been devoted to the development of a conceptual framework for actuarial technical standards. The BAS published a preliminary consultation paper in April 2007. We shall issue a draft of the framework for public comment in the second half of 2007. One of our most important projects during 2006/07 has been our work on Choice in the UK audit market. In April 2006 we hosted a public meeting to discuss the findings of a report prepared by OXERA which had been commissioned jointly by us and the DTI. Over forty organisations and individuals responded to our discussion paper and the key conclusions from those responses were debated at a second public meeting in September. In view of the widespread recognition of the significance of the risks presented by the current characteristics of the audit market in the UK, we established a Market Participants Group to identify and assess possible actions which market participants could take to mitigate those risks. The MPG published its interim report in April

  1. In parallel we have been working with the FSA, DTI and HMT in the UK, and with fellow regulatory organisations in other jurisdictions, to identify potential regulatory actions to mitigate the risks. The continuation of this project will be a major feature of our work in 2007/08.

In November we published a discussion paper on audit quality. The paper identifies those drivers that we believe are central to achieving a high quality audit of listed companies and considers whether there are threats which weaken the operation of those drivers. The paper has been prepared in the context of the current financial reporting framework in the UK and the Republic of Ireland but has also been widely circulated internationally because of the increasingly international context in which financial reporting and auditing take place. The paper has been discussed at meetings of the IAASB and IFIAR. We have been encouraged by the fact that over thirty five organisations and individuals have responded to our paper. We are currently considering these responses. We also made progress on drafting a revised statement on ‘true and fair ', with a view to updating our statement published in August 2005 to take account of recent developments, including the Companies Act

  1. We informally consulted a number of accounting experts and have commissioned an opinion from leading counsel. We are reflecting on their comments and intend to publish a further statement during 2007.

In 2006/07, the ASB issued two important publications on pensions accounting and disclosure. In December, the ASB issued an amendment to FRS 17 ('Retirement Benefits') to align the disclosure requirements with the equivalent international standard (IAS 19). In January the ASB published a Reporting Statement ('Retirement Benefits – Disclosures') which is designed to promote greater transparency in the reporting of pension obligations. The Statement is designed as a best practice guide and has persuasive rather than mandatory effect.

The issue of narrative reporting has been highly topical over the past few years, particularly in the context of the possible requirement for a statutory OFR. In January the ASB published an assessment of how UK listed companies were complying with the legal requirement to publish a Business Review and of the extent to which companies had chosen to adopt the best practice suggested in its Reporting Statement on the OFR. This topic will continue to be of importance to us in future years as the FRRP will have a statutory duty to monitor compliance with the requirement for Business Reviews for financial years commencing in and after April 2007.

Influencing international standards and cross-border regulatory co-operation

We have devoted considerable attention to the IASB's projects relating to convergence with US GAAP and updating the conceptual framework for financial reporting. The ASB has submitted comments on several of the convergence projects and has taken a leading role in strengthening the capability of European standard-setting bodies to influence the IASB's thinking. The ASB also hosted a public meeting to discuss the conceptual framework project and has submitted a paper calling for the IASB to revise its thinking on some important elements of the proposed framework. These projects will continue to be at the forefront of our work in 2007/08. In the light of the continuing uncertainty about the future direction of international standards, the ASB has decided to defer finalisation of a strategy for converging UK accounting standards with IFRS.

We have also devoted considerable resources to the IAASB's “Clarity” project, which is intended to improve international auditing standards, on which the APB's UK standards are based. This is especially important as the Statutory Audit Directive provides the basis for the adoption of IAASB's standards throughout the EU. The focus of our efforts has been on supporting the idea of principles-based standards and challenging calls for overly prescriptive requirements which might undermine the importance of professional judgement. The Clarity project is not planned to be completed until 2008 and will continue to be a priority for us in 2007/08.

The emergence in recent years of independent regulation of auditing, coupled with the international nature of capital markets, has made co-operation between national audit regulatory authorities an important priority for us. In the EU, we are founder members of the EGAOB and have played a leading role in it and in the various sub-groups established under it. We also played a leading role in the establishment of IFIAR and I was honoured to have been appointed as its first Vice-Chair. Our participation in these international organisations means that the UK is able to play an important role in the development of auditing regulation internationally.

Our work on international co-operation has already provided practical benefits. A particular feature of the work in 2006/07 has been AIU-led inspections together with the US Public Company Accounting Oversight Board at two of the “Big 4” UK audit firms. These inspections have been helpful in developing the PCAOB's understanding of how the UK system for inspections of the major audit firms operates in practice, thereby helping to pave the way for arrangements under which the UK (and the EU as a whole) and the US are able to place reliance on one another's regulatory arrangements in the future.

During 2006/07 we developed our relationship with the US Securities and Exchange Commission. A particular focus was on our common objective in ensuring that the large number of companies which are listed in both the UK and the US prepare their financial statements in accordance with accounting standards and other regulatory requirements. In April 2007 we, the SEC and the FSA signed a protocol which will enhance our ability to co-operate on this objective.

Monitoring corporate reporting and governance practices

The AIDB's workload in operating an independent investigation and discipline scheme relating to the accountancy profession increased substantially during the year. The independent tribunal in the Mayflower case concluded that the allegation of misconduct had been proven in respect of only one of the respondents. The tribunal awarded costs totalling £1.0m to the other respondents. The outcome of this case has potentially serious implications for the operation of the AIDB's scheme and we are undertaking a review of these implications. If we conclude that changes to the relevant regulatory requirements are appropriate we shall bring forward proposals for consideration.

The investigation into the conduct of Deloitte & Touche LLP as auditors in relation to MG Rover continued, although important aspects of that work were deferred so as not to interfere with the work of the DTI Inspectors who are conducting a wider investigation into the affairs of MG Rover. Investigations in relation to four new cases were commenced.

The principal focus of the FRRP's review of annual and interim accounts was the first-time implementation of IFRS by listed companies. The FRRP issued a report in December which found a good level of compliance but highlighted a number of recurring issues which companies should consider in preparing their reports in future years.

In July 2006 the AIU published the results of its work in monitoring audit quality at the 9 largest audit firms in the UK. It concluded that the audits reviewed had generally been conducted to a high or acceptable standard, with the key audit judgements reviewed generally being both appropriate and soundly-based. The report noted a number of areas in which firms could improve the quality of their work. The scope of the AIU's work was expanded in 2006/07 to the full range envisaged in the DTI's 2003 Review of the Regulatory Regime of the Accountancy Profession. In addition to the 9 largest audit firms, the scope included for the first time a selection of the audits of listed and other major public interest entities undertaken by other UK audit firms. The AIU will report publicly on the key findings and themes arising from these inspections in the summer of 2007.

Modifying the UK regulatory regime

The 8th Company Law (Auditing) Directive was formally adopted by the EU in June 2006 and we have been heavily involved in preparations for its implementation, which is scheduled for mid-2008. The two aspects which are likely to have the greatest impact on our stakeholders are the provisions relating to foreign auditors and to audit committees. Our primary focus in our discussions with the DTI and with the EU Commission has been to ensure that the Directive can be implemented in a proportionate manner. We have also been anxious to ensure that UK stakeholders are fully aware of the implications of these provisions, which are not limited to the audit profession. In February 2007, we and the DTI hosted a meeting for UK stakeholders to assist them in developing their responses to the Commission's consultation paper. The implementation of this Directive remains a considerable challenge and will continue to be a priority for us in 2007/08. The amendments to the 4th and 7th Company Law (Accounting) Directives are due to be implemented in the UK in

  1. The main implications for corporate reporting in the UK relate to the requirement for a corporate governance statement and disclosures of related party transactions. We have been working closely with the DTI to ensure that these changes are implemented in a proportionate manner.

The Transparency Directive, which came into force in January 2007, will also have an impact on corporate reporting in the UK. The primary responsibility for implementing the Directive rests with the FSA but the implementation of the Directive in the UK also has important implications for us and has involved a significant amount of preparatory work in 2006/07. It is intended that the FRRP's scope will be expanded to include for the first time non-UK companies with a listing on a UK regulated market. The success of the LSE in attracting overseas listings means that a large number of companies will come within the FRRP's scope for the first time, which will have an impact on our workload in 2007/08.

The Companies Act 2006 contains a number of provisions which affect us and we have been heavily involved in discussions with the DTI during the Act's passage. One of the more important provisions of the Act makes it lawful for the first time for auditors to agree with their clients' limitations on their liability. The wording of the Act is open to a range of interpretations and a number of our stakeholders have asked us to establish guidance as to how the Act might be implemented in practice. We have included this project in the Plan for 2007/08. The Act also contained provisions applying the Freedom of Information Act to the POB. During 2007/08 we shall continue to prepare for the implementation of these provisions, which are expected to come into force in April 2008.

Establishing a Strategic Framework for the FRC

In December 2006 we published for comment a draft Strategic Framework which set out the outcomes and other elements which we believe contribute to our overall aim of promoting confidence in corporate reporting and governance. The Framework makes explicit the fact that the nature of our aim and remit means that, whilst some of its elements are principally the responsibility of the FRC, most depend principally on market participants or other agencies. We intend the Framework to be a way of facilitating co-operation among our wide range of stakeholders to promote well-founded confidence in corporate reporting and governance in the UK.

We are very grateful to those organisations and individuals who provided us with thoughtful comments on the draft Framework. In April 2007 we published a version of the Framework which takes into account those comments. The Framework is available on our website at: www.frc.org.uk/about/. Our priorities for 2007/08 have been set in the context of the Framework and in 12 months' time we shall report against the Framework. We shall keep the Framework under review and will make changes, following consultation, if and when circumstances change.

Making the FRC a more capable organisation

The benefits and costs of our work can have a significant impact on our stakeholders. For this reason we take seriously the need for the FRC to be a capable organisation. The Chairman has described in his report the steps which we are planning to take to make the FRC a better-governed organisation. This section of my report explains some of the steps which we took in 2006/07 to make the Executive more effective.

We are primarily a knowledge-based organisation whose success depends crucially on our staff. I am grateful to them for their expertise and efforts during the past year. We have tried to assist them to become even more effective by paying closer attention to aligning their objectives with the FRC's Plan and by encouraging them to take a greater degree of ownership of their professional and personal development.

We have been pleased at our ability to recruit experienced professional accountants, actuaries and lawyers to work for the FRC. I continue to believe that the FRC can offer rewarding and constructive employment opportunities for skilled and innovative staff. I am particularly pleased at the way in which we have been able to make the staff recruited in relation to our new responsibilities for actuarial standards and regulation feel at home in the FRC.

We have continued to invest in IT systems to help manage the complex flows of work and information in the FRC. We have taken steps to increase our resilience in the face of potential disruptions.

One aspect of being a capable regulatory organisation is the ability to influence the behaviour of market participants. A pre-requisite for influence is communication and the independent survey of our stakeholders which Ipsos MORI undertook in 2006 revealed that we should do more to publicise our work and enhance our ability to engage with our stakeholders. In response to this feedback we have made a number of changes to the way we work. We now publish a quarterly update on developments in corporate reporting and governance which contains a summary of the major developments since the previous report and outlines those expected in the next quarter. We have organised a number of public meetings for stakeholders on important topics; the level of attendance at these meetings suggests that our stakeholders have found them useful. We have also devoted much more time to meetings with market participants, either individually or in small groups, to seek their views and to explain at first hand what we are working on. We have found these changes to be useful and expect to continue to operate in this way in future.

In last year's Annual Report I reported that our stakeholders had emphasised the need for the FRC to assess possible regulatory interventions thoroughly at an early stage to gauge their likely impact, particularly on smaller enterprises. We have followed this approach during 2006/07. For example: In January 2007 the ASB published an updated version of the Financial Reporting Standard for Smaller Entities, which included a major simplification of the requirements relating to share-based payments as a result of views expressed on the Exposure Draft. Also in January, the APB began consultation on the need for guidance on implementing Auditing Standards on smaller entity audits and new draft guidance on applying the documentation requirements of ISAs (UK and Ireland) to smaller entities.

Performance Assessment

As I noted in my report last year, there are few quantifiable measures, such as market value or market share, which can be used to measure the performance of the FRC. We have identified three aspects of our performance (Outcomes, Outputs and Effectiveness) which we believe are relevant to an assessment of our performance. In section Five we have set out a self-assessment based on the evidence which we have collected during the course of our work and on external evidence, including the results of an independent survey of our stakeholders conducted by Ipsos MORI in March

  1. We are grateful to all those who took time to contribute to that survey.

The survey shows that levels of confidence in corporate governance, corporate reporting, auditing and in the accountancy profession in the UK have remained at the very high levels seen in previous years. This year, for the first time, the survey assessed confidence in the actuarial profession. The key findings in respect of actuaries are that there are high levels of confidence in the reliability of actuarial information and in the integrity and competence of the actuarial profession. The survey also found an improvement in awareness of the work of the FRC and in our communications but that we still need to do more in relation to the investor community.

One aspect of our performance which is quantifiable is cost management. Our core operating costs in relation to our responsibilities for accounting, auditing and corporate governance were £10.8m, compared to a budget of £10.2m. The over-spend is wholly attributable to the Mayflower costs award of £1.0m. The budget for 2006/07 was less than the budget originally proposed for 2004/05. Our core operating costs in relation to our responsibilities for actuarial standards and regulation were close to budget at £1.3m. When these costs are considered against the range and significance of our responsibilities I believe that we are a very cost-effective organisation.

Looking ahead to 2007/08

Our Plan for 2007/08, which we published in April 2007, has been updated to reflect comments received from stakeholders and additional information which was not available in December 2006 when we published the initial version. The Plan contains a wide range of activities and projects which have considerable potential to reinforce confidence in corporate reporting and governance in the UK. However, the most important determinant of the level of confidence is not the work of the FRC but the skills and behaviour of the large number of market participants who are responsible for corporate reporting and governance.

Handwritten signature of Lane Boyle. Paul Boyle

Three Operating Body and Committee on Corporate Governance Reports

Four Expenditure and Funding

Five Performance Assessment

Annexes

Annex A Directors' Report and Accounts for the year ended 31 March 2007

Annex B Membership of Council, Operating Bodies and Committees

Annex C Organisational Structure

Annex D Financial Management and Reporting Framework

Annex E Abbreviations

Annex F Contact Details

Paul Boyle

3. Operating Body and Committee on Corporate Governance Reports

Accounting Standards Board (ASB)

The ASB continues to work on influencing the international accounting standard-setting agenda. During the year, the ASB has devoted a good deal of resource to monitoring the joint project by the IASB and US FASB to develop a common conceptual framework that both Boards can use in preparing new and revised accounting standards. The project is important in that it will have a significant influence on the future direction of financial reporting.

The Boards issued their first discussion paper in July 2006, setting out their preliminary views on the objective of financial reporting and the qualities that make the information useful for decision-making. To raise awareness of the issues and engage UK constituents, the ASB hosted a public meeting in September, which helped inform the ASB's response. The ASB also carried out work to articulate the importance of stewardship as an objective of financial reporting and, together with a number of other national standard-setters, the implications of the conceptual framework project for public-benefit entities.

The ASB seeks to influence other IASB agenda projects, responding to all consultation documents and holding public meetings on issues of particular importance, including sessions on measurement in financial reporting and leasing. During the year, the ASB has continued work on its research project to reconsider the fundamental principles of pensions accounting, which I hope will contribute to the development of improved international accounting standards, which may provide a suitable basis for a review of FRS 17. The full research will be published as a discussion paper during 2007, but on pensions disclosures the ASB has already issued an amendment to FRS 17, to align the disclosures with those in the equivalent international standard (IAS 19) and a Reporting Statement of best practice 'Retirement Benefits – Disclosures'. The Reporting Statement is designed to promote greater transparency in financial reporting for defined benefit schemes.

Working within the EU remains an important element of the ASB's work, given that listed companies in the UK and Republic of Ireland are required to use EU-adopted IFRS in their group financial statements. During the year, the ASB has continued to play an active role in the European Financial Reporting Advisory Group, in both its work in advising the Commission on the endorsement of IFRS and in its Pro-active Accounting Activities in Europe initiative. The ASB has continued to discuss its strategy for convergence of UK standards with IFRS. Respondents to a consultation on convergence held during the year broadly support a two-tier approach: full convergence with IFRS for listed companies and other publicly accountable entities; and a lower level potentially (and ideally) being based on the outcome of the IASB's project on an IFRS for SMEs, on which the IASB issued an Exposure Draft in February

  1. The ASB has decided to defer any final decisions on convergence until there is a much clearer understanding of the outcome of the IASB project on SMEs, at which time a judgement can be made on whether or not it is suitable for the UK's needs. The ASB continues to encourage improvements in narrative reporting. In January 2007, the ASB published a review of narrative reporting by UK listed companies in

  2. The purpose of the review was to highlight the strengths and weaknesses of current narrative reporting, in the interests of widespread adoption of best practice.

An important element of the ASB's work is its engagement with UK and Irish constituents, in informing its own standards and its interaction with the IASB and Europe.

There have been some changes in the membership of the ASB during the year. Jon Symonds stood down as a member of the Board, and I thank him for his contribution to the work of the Board. I welcome three new members of the Board: Peter Elwin, Geoff Whittington (a former member of the IASB) and Edward Beale.

Ian Mackintosh (Chair)

Auditing Practices Board (APB)

Auditing standards

In 2004 the APB issued new auditing standards as well as ethical standards on auditor integrity, objectivity and independence. Pressure for international harmonisation is likely to result in changes to these standards in the foreseeable future. In the interim period, the APB has focussed on contributing to the improvement of international auditing and ethical standards and has not sought to change UK standards unless this is necessitated as a direct result of a change in UK legislation.

The finalisation of the EU's Statutory Audit Directive in June 2006 provides the platform for the adoption of ISAs issued by the IAASB throughout Europe. Although no date has yet been specified for the adoption of ISAs by the EU this will become feasible once IAASB's Clarity Project has been completed at the end of 2008. The APB anticipated this development and has been actively involved in the work of the IAASB for many years

  • contributing directly to some IAASB projects and indirectly, through commenting on exposure drafts, on all others. The APB has also, through its press releases and other material published on its website, sought to raise the awareness of UK and Irish auditors, investors and preparers of financial statements of the important changes that are being made to the ISAs and to facilitate their input to the process.

There is inevitably a tension between the desire for standards that promote the exercise of professional judgement in conducting audits and standards that add specificity to the audit process to help those involved in monitoring compliance. This is one of the issues raised in the November 2006 FRC Discussion Paper "Promoting Audit Quality", which the APB made a significant contribution to developing. This paper:

  • identifies those drivers that the FRC believes are central to achieving a high quality audit of listed companies
  • considers whether there are 'threats' which weaken the effective operation of those drivers
  • seeks opinions as to whether, within the existing legal and regulatory framework, all appropriate steps are being taken to maintain and enhance the quality of audits and, if not, what more could or should be done.

The responses to “Promoting Audit Quality" will help the APB shape its future work programme.

Ethical standards

The APB attaches the same degree of importance to its role in influencing the development of international ethical standards. During the year the UK has taken the Chair of the IESBA Consultative Advisory Group and has been closely involved with IESBA's work to update its Code of Ethics. Just before the end of the year an exposure draft of proposed changes to section 290 of its Code of Ethics on auditor independence was published. During 2007 the APB will review, and comment on IESBA's proposals and commence a review of its own ethical standards for auditors. As the IESBA has moved towards the APB's position in many areas, there is not expected to be a need for major changes to UK standards. As with auditing standards the challenge will remain how to balance the need for standards that are sufficiently robust to meet the public interest test, especially on listed companies, with maintaining a workable approach to smaller audits.

The APB is conscious that auditing and ethical standards must be appropriate to all audits including the audits of smaller entities. Despite recent increases in the audit exemption threshold, many small companies are still audited and there remain statutory requirements for other small entities including charities and pension funds.

During the year the APB's SME audit sub-committee has reviewed ISA exposure drafts and, through the APB's responses, has been effective in eliminating some proposed requirements which are not appropriate on smaller audits and adding to the guidance material on how the requirements can best be applied on smaller audits.

A particular concern of the SME audit sub-committee has been the cost effectiveness of the documentation requirements in ISAs. In January 2007 the APB issued draft guidance intended to help auditors to understand what audit documentation is required on a smaller audit, which includes illustrative examples of audit documentation that are relevant to the requirements of the audit risk and fraud standards. The illustrative examples can be viewed as training material and therefore not directly falling within the APB's remit. During 2007 we intend to discuss with the accountancy bodies the important question of who provides training support on the application of auditing standards to audit firms, especially smaller audit firms. This will be an important issue when revised ISAs are adopted by the EU and the degree of change involved is likely to be considerable.

Richard Fleck (Chair)

Board for Actuarial Standards (BAS)

The BAS was established on 1 April

  1. This is my first Chair's report.

The BAS was established, following the Morris Review of the actuarial profession, to set actuarial standards with the aim of ensuring that users of actuarial information can place a high degree of reliance on its relevance, transparency of assumptions, completeness and comprehensibility. The Board has a membership drawn from a wide base (including lay members) representing a cross-section of groups with an interest in actuarial matters, and has agreed the BAS Aim and Objectives, which are available on the FRC website at: www.frc.org.uk/bas/about/aims.cfm. The first tasks undertaken by the BAS concerned the preparatory work for its future operations. Part of this resulted in a MoU between the FRC and the Actuarial Profession in May

  1. The MoU set out the respective responsibilities for actuarial regulation, including a commitment on the part of the Actuarial Profession to publicise BAS standards and to require actuaries to observe them. Under the division of responsibilities the BAS is responsible for standards of a technical nature and the Actuarial Profession is responsible for standards of an ethical nature. Arrangements for communications between the Actuarial Profession and the FRC were agreed in October 2006.

In May 2006 the BAS resolved to adopt all existing Actuarial Profession Guidance Notes (GNs) of a technical nature. However, some of these GNs are referred to directly in legislation and were not finally adopted until April 2007 when appropriate amending legislation became effective.

Since adoption several of these GNs have been amended; in some cases this is because of changes that were in progress at the time of the handover and which were subsequently adopted by the BAS when they were completed. In other cases the BAS made changes to reflect changes in underlying regulation.

(In the case of four GNs applying to life assurance business, this was done by removing all direct and implied references to FSA rules and guidance, in order to obviate the present and future need to update those references). All current and previous versions of adopted GNs are available on the FRC website.

The FRC recruited a second full-time actuary in May 2006 to support the work of the BAS. This remained its level of professional support for the year.

As recommended by the Morris Review the main initial priority of the BAS has been to develop a conceptual framework of the concepts and principles underlying actuarial work. Our aim is to develop a high quality, endurable framework and we believe the project is breaking new ground for actuarial practice anywhere in the world. To this end we formed three working groups, who have been considering the issues of, respectively, value, risk and stakeholders' interests; we are most grateful to the many participants, including our Board members, who have spent a great deal of time and thought on these issues. We published a paper in April 2007 with a preliminary indication of the issues the conceptual framework might contain, and we aim to follow this up in the Autumn with a full discussion paper setting out the issues on which we will be inviting views.

Jointly with the POB, the BAS commissioned research with pension scheme trustees and non-executive directors of insurance companies to help understand their experience and needs when dealing with the Actuarial Profession. The results of this research are now being considered by the Stakeholder Interests Working Group, which comprises those familiar with taking decisions based on actuarial input (such as pension trustees and representatives of the insurance world) as well as people with a particular concern with the "end-user" - the beneficiaries (such as policy holders or pension scheme members) and the public interest (journalists and consumer advocates).

A great deal of activity has gone into establishing liaison arrangements, not only with the Actuarial Profession and some of its related bodies and societies, but also with regulators, government departments, academic and research bodies, etc. This has been achieved through a mixture of regular meetings and more ad hoc arrangements to address specific issues as they arise. At this stage of our development, the BAS has been largely concerned with the UK, but bearing in mind the far-reaching importance of the EU's Solvency II project to insurance (and, in due course, to pensions), we have now begun to involve ourselves in this; in time, we expect international developments to form a significant part of our activity.

Paul Seymour (Chair)

Professional Oversight Board (POB)

The POB continued to work closely with other parts of the FRC on most aspects of its work. In particular in 2006/07 the POB has been heavily involved in the FRC project on Choice in the UK audit market and with the APB in the work to develop the FRC Discussion Paper “Promoting Audit Quality".

Monitoring the quality of the audits of economically significant entities through the Audit Inspection Unit (AIU) continued to be a major focus of the POB's work in 2006/07. The scope of this work was similar to 2005/06 in that the AIU visited both the four largest audit firms and the five other firms that audit the largest number of entities within their remit. In addition the AIU reviewed for the first time a sample of audits within scope undertaken by other UK audit firms. The AIU will report publicly on the key findings and themes arising from these inspections in the summer of 2007.

A particular feature of the work in 2006/07 has been AIU-led inspections together with the US Public Company Accounting Oversight Board at two of the “Big 4” UK audit firms. These inspections have been helpful in developing the PCAOB's understanding of how the UK system for inspections of the major audit firms operates in practice, thereby helping to pave the way for arrangements under which the UK (and the EU as a whole) and the US are able to place reliance on one another's regulatory arrangements in the future.

The POB initiated a debate with stakeholders during the year on the way in which AIU findings on audit firms are reported, with a view to seeing if more information on individual firms could be made available publicly and whether information on individual audits reviewed might be made available to the company's Audit Committee. The POB expects to publish firm proposals shortly. This was the second year in which the POB has carried out a full programme of monitoring visits to those accountancy bodies that offer a recognised UK audit qualification, or are recognised to supervise UK auditors. This involves updating the map of each body's regulatory systems, testing these in practice, reporting findings and making recommendations to the bodies, and following up on the responses to previous recommendations. The POB reports on this work to the Secretary of State for Trade and Industry, and this Report should be publicly available in July

  1. Overall, whilst the Board has made a further series of detailed recommendations to all of the recognised bodies in this year, it continues to be satisfied that the recognised bodies take their regulatory responsibilities seriously, that with minor exceptions they have adequate resources to undertake these functions effectively, and that they meet their statutory obligations. The recognised bodies have responded for the most part positively to the recommendations we made last year.

The POB also undertakes projects to consider a particular aspect of the bodies' regulatory activities in greater depth and has started a project in 2006/07 on how the bodies meet practical training requirements for auditors. The international dimension of the POB's work continued to grow in 2006/

  1. In particular the arrangements for regulatory cooperation amongst EU audit oversight bodies are developing and the POB has played a significant role within the European Group of Auditor Oversight Bodies, on which the POB represents the FRC. The principal focus is on implementation of the new 8th Company Law Directive on audit regulation, which came into force on 17 May 2006 and which Member States must implement by 29 June 2008. In particular the Directive's provisions on the regulation of the third country auditors of companies traded on EU regulated markets pose a complex challenge and the POB has worked closely with the European Commission and other Member States to try to find a practical and proportionate way forward. In 2006/07 the POB assumed its new responsibilities for oversight of the regulation of the Actuarial Profession, as part of the package of reforms recommended by Sir Derek Morris in March

  2. In December 2006, the POB published a review of the profession's progress in implementing the recommendations made to it by the Morris review, and set out its ongoing approach to oversight of the profession. The POB concluded that the profession had made good progress in education and training, but that further work was needed in the areas of ethical principles and CPD requirements for reserved roles, including in topical areas such as mortality projections. Another Morris recommendation was that the FRC should, within 2-3 years, satisfy itself that appropriate monitoring and scrutiny of actuaries is occurring. The POB established arrangements with the profession and the relevant statutory regulators to assess the existing monitoring systems as the initial phase of this review which is continuing into 2007/08. The POB has also worked with the BAS on a number of matters, including an FRC survey of the needs of the principal users of actuarial services, with input from the FRC's Actuarial Stakeholder Interests Working Group, and consideration of the drivers of quality in actuarial practice which will also continue into 2007/08.

There were no departures from POB during the year. I was delighted to welcome Anthony Carus, who joined the Board in May 2006.

Handwritten signature of Chris Thoff. Sir John Bourn (Chair)

Financial Reporting Review Panel (FRRP)

The FRRP carried out 312 reviews in 2006/07, including interim accounts and annual accounts of overseas issuers. 20 sets of accounts were also subject to restricted review in respect of their pensions disclosures. This year the Panel concentrated on monitoring the implementation of IFRS in the annual group accounts of listed companies in the UK. The Panel published its findings in respect of its early reviews of IFRS annual accounts in December

  1. This report followed the Panel's earlier work on interim accounts of listed companies which were required to be prepared in accordance with the valuation and measurement principles of the international accounting standards. The move from UK GAAP to IFRS was a major challenge for UK companies and the Panel applauded the work that had been put into producing the first annual accounts under the new framework. The Panel found a good level of compliance with IFRS, but noted that as everyone becomes more familiar with the new requirements it is likely that there will be further changes and improvements. The Panel made a number of suggestions in that direction and encourages a more focused and thoughtful consideration of certain of the accounting requirements which could reduce the overall length and complexity of the accounts. The Panel believes that, like convergence, consistent application of IFRS is a medium term objective that will be achieved through experience and familiarity.

During the year the Panel conducted a review of defined benefit pension disclosures by companies reporting under IFRS and UK GAAP. The Panel was encouraged by the results of its review and the general level of compliance with the complex disclosure requirements. Its report, published in July 2006, identified areas where the quality of pensions reporting could be improved and complemented the work being carried out by the ASB in developing its Reporting Statement of best practice on pensions reporting.

In October 2006 the Panel published a detailed report on the results of its reviews for the 2005/06 financial year which were prepared in accordance with UK GAAP. The Panel found no evidence of systemic weakness in the accounts that it examined but indicated a number of areas where reporting could be improved which were also relevant for companies who continue to report in accordance with UK standards.

Throughout its work during the year, the Panel was impressed by the thoroughness and technical understanding demonstrated by companies in their responses to the Panel's enquiries. In many cases there was evidence of effective involvement of audit committees.

The introduction of IFRS for the group accounts of listed issuers has heightened the importance of our relationships with overseas regulators. In April 2007, as stated in the report of the Chief Executive, the FRC signed a protocol with the US Securities and Exchange Commission and the FSA. The agreement allows for the exchange of information between SEC and the Panel in connection with the accounts of issuers listed in the UK and registered with the SEC in the US. It is hoped that the arrangements will help better manage the potential regulatory burden on dual listed entities trading on both the UK and US markets.

The Panel continues to be an active participant in European enforcer sessions (EECS), a forum for national enforcers of accounting standards co-ordinated under the CESR. In addition to technical issues, matters of common interest are discussed to further an understanding of different approaches to enforcement and encourage consistent application of international accounting requirements. There have been a number of changes to the FRRP membership during the year. Rosemary Thorne, David Mallett and Nigel Macdonald all left the Panel, having served three full terms. Tony Wedgwood also retired when his term expired in March

  1. My thanks go to them for their valuable contribution and support to the Panel during their years of service. I was pleased to welcome new members: Daniel Abrams, James Coyle, Jimmy Daboo, Mary Keegan, David Lindsell, Chris Moulder and Richard Pinckard.

Bill Knight (Chair)

Accountancy Investigation and Discipline Board (AIDB)

The Accountancy Investigation and Discipline Board (AIDB) is the independent, investigative and disciplinary body for accountants in the UK. It operates and administers an independent disciplinary scheme covering members of the following accountantcy professional bodies: the Association of Chartered Certified Accountants, the Chartered Institute of Management Accountants, the Chartered Institute of Public Finance and Accountancy, the Institute of Chartered Accountants in England and Wales, the Institute of Chartered Accountants of Ireland and the Institute of Chartered Accountants of Scotland, which joined the Scheme in 2006.

The AIDB only considers matters which raise important issues affecting the public interest. During 2006/2007 the Board considered 18 potential matters. The AIDB also monitored a number of other potential cases, which came to its attention from a variety of sources.

In June 2006 the AIDB announced that it had decided to investigate the conduct of Mr Geoffrey Stuart Pearson in relation to events at Langbar International Limited. This decision was taken following consultation with the ICAEW (the professional body of which Mr Pearson is a member), which has agreed that the matter should be investigated by the AIDB. In July 2006 it announced an investigation into events at European Business Trust, as a result of a referral by the ICAI. In October 2006 the AIDB announced it would investigate the conduct of RSM Robson Rhodes LLP, auditors, and senior executives at iSoft plc, again after consultation with the ICAEW.

In 2006 the Board commissioned a review of the AIDB Scheme by its legal advisors. The objective of the review was to ensure that the disciplinary process operates in a fair, transparent and efficient manner, consistent with the principles of good regulation. A number of recommendations have been or are being implemented.

In January 2007 the AIDB completed its first full disciplinary case. After a total of 20 days of hearings, the independent Tribunal set up by the AIDB to consider disciplinary complaints arising out of to the collapse of the Mayflower Corporation plc completed its deliberations and issued its findings. The independent Tribunal in the Mayflower case upheld the allegation of misconduct against one of the respondents and excluded the individual in question from membership of the ACCA for a period of 12 months. The Tribunal dismissed allegations of misconduct against the other two respondents and awarded costs in their favour.

The Tribunal's decision has serious implications for the conduct of future disciplinary cases by the AIDB. Consequently, the Board decided to widen the scope of its review of the Scheme's operation and is considering a number of additional changes designed to ensure that the independent disciplinary process in public interest cases continues to operate smoothly and effectively.

Also in 2006/07, in line with recommendations contained in the Morris Review of the Actuarial Profession, the AIDB has worked closely with the FRC and the Actuarial Profession to agree the draft Scheme and detailed Regulations that would underpin the inclusion of the Actuarial Profession in the discipline scheme later in 2007.

In early 2007, Board Members Sarah Brown, Stuart McKee and David Thomas were reappointed for a second three year term. I am delighted that they have chosen to continue their involvement with the AIDB.

Illegible handwritten signature written vertically. Mike Fogden (Chair)

Committee on Corporate Governance

The Committee on Corporate Governance is a committee of Council with full authority to keep under review developments in corporate governance generally and in particular to keep under review the Combined Code and its implementation by companies and their shareholders. I have chaired it since assuming the Chair of the FRC, following the example of my predecessor. The Committee carried out a formal but light touch review of the Code in 2005 and has started a similar exercise to take place in the rest of

  1. A consultation paper was issued on 18 April 2007, available on the FRC website at: www.frc.org.uk/corporate/combinedcode.cfm.

As preparation for this review I held a series of meetings during the year with company chairmen and senior investors to learn at first hand about their experience of implementing the Code. Overall the view was positive, with the Code seen as having contributed to improvements in the governance of listed companies and a more constructive dialogue between boards and shareholders. However some concerns were raised, for example about the impact of the Code on smaller listed companies and whether the 'comply or explain' mechanism was working as effectively as it might. These issues will need to be addressed as part of the forthcoming review.

During 2006, the FRC provided assistance to the Pre-Emption Group, which was set up following a report carried out for the DTI by Paul Myners to update the Pre-Emption Guidelines. A revised Statement of Principles was published in May 2006.

2006/07 has seen a lot of activity at EU level. Revised versions of the 4th and 8th Company Law Directives – which respectively introduce new mandatory requirements on listed companies to make a corporate governance statement in the annual report and to have an audit committee were finalised, and a new Directive intended to make it easier for cross-border investors to exercise their rights is close to being agreed. In substance the requirements set out in the Directives are largely in line with existing market practice in the UK, but the DTI is nonetheless required to incorporate the Directives into UK law. It is possible that some consequential amendments to the Combined Code may be needed as a result.

Almost all EU Member States now have a national corporate governance code such as the Combined Code. While the detailed content of these codes and the way they are enforced will understandably differ as a result of different market structures and legal traditions, by and large they are all trying to address the same sort of issues. For that reason during 2006 the FRC initiated an informal network of some of the organisations responsible for these national codes, to provide an opportunity to exchange experiences and best practices. We hope to develop these contacts further during 2007/08.

Handwritten signature of Paul H. Sir Christopher Hogg (Chair)

4. Expenditure and Funding

Our Financial Management and Reporting Framework set out in Annex D provides the framework within which we manage and report on the costs of our activities and how they are funded. While we endeavour to secure value for money in all our expenditure, we believe that the cost of our core operating activities is the best indicator of our effectiveness in managing our costs.

Summary of expenditure

Actual 2006/07 £m Budget 2006/07 £m Actual 2005/06 £m
Accounting, auditing and corporate governance
Core operating costs 10.8 10.2 9.0
Audit inspection costs 2.1 2.5 1.7
Accountancy disciplinary case costs 0.9 0.5 0.5
Review Panel case costs - - -
Total 13.8 13.2 11.2
Actuarial standards and regulation
Core operating costs 1.4 1.3 -
Actuarial disciplinary case costs - - -
Total 1.4 1.3 -
Total 15.2 14.5 11.2

The Framework is consistent with the way in which we manage our costs and the basis on which they are funded. Our audited financial statements are in Annex A on pages 45 to

  1. The expenditure as reported above can be reconciled to the audited financial statements as follows:
£m
Total expenditure in the table above 15.2
Deduct: Capital expenditure included in core operating costs (0.2)
Payments in respect of onerous lease in core operating costs (0.4)
Release of Onerous Lease Provision in statutory accounts (0.3)
Add: Depreciation not included in core operating costs 0.3
Net operating expenditure per audited financial statements 14.6

Accounting, auditing and corporate governance

Core operating costs

Core operating costs, analysed by category of expenditure, were as follows:

Actual 2006/07 £m Budget 2006/07 £m Actual 2005/06 £m
Staff Costs 7.2 7.0 6.2
Accommodation costs 1.1 1.0 1.3
AIDB costs award 1.0 - -
Professional fees 0.3 0.7 0.5
IT costs 0.5 0.5 0.6
Other costs 1.1 0.9 0.8
Contingency - 0.3 -
11.2 10.4 9.4
Sundry income (0.6) (0.3) (0.6)
Capital expenditure 0.2 0.1 0.2
Total 10.8 10.2 9.0
Staff numbers 55 61 49

The AIDB cost award arose from the decision of the independent tribunal in the Mayflower case. Excluding the AIDB cost award, core operating costs would have been £0.4m below budget. Accommodation costs include the settlement in respect of the surrender of the lease of the former premises of the Accountancy Foundation, one of the FRC's predecessor bodies, which was surrendered in March 2007.

The additional sundry income arose from higher than budgeted royalties on publications.

Core operating costs, analysed by operating unit, were as follows:

Actual 2006/07 £m Staff Budget 2006/07 £m Staff Actual 2005/06 £m Staff
ASB 1.8 13 2.5 16 2.1 13
APB 0.9 6 1.2 7 0.8 6
FRRP 1.4 10 1.7 11 1.2 7
POB 1.5 7 1.3 7 1.1 6
AIDB 1.9 4 1.0 5 0.8 4
CGU 0.1 1 0.1 1 0.1 1
Planning & Resources 2.0 9 1.3 9 2.0 8
Corporate 1.2 5 1.1 5 0.9 4
Total 10.8 55 10.2 61 9.0 49

These figures represent the core operating costs of each operating unit plus an allocation of the central overheads based on the number of full time staff in each operating unit.

The AIDB costs were significantly higher than budgeted due to the cost awards in the Mayflower case.

Audit Inspection Unit

The costs of the AIU represent the costs of the programme of independent audit inspections. The costs in 2006/07 were £2.1m compared to a budget of £2.5m and £1.7m in 2005/06. The average number of AIU staff increased to 16 from 13 in 2005/06.

Investigation and disciplinary case costs

During the year the AIDB incurred costs of £0.9m in relation to investigating and prosecuting individual cases. These costs are not susceptible to firm budgetary limits because the number and complexity of cases is unpredictable.

The levy on listed companies for 2006/07

The levy on listed companies is collected on our behalf by the FSA at the same time that it collects its own fees, which helps to reduce the costs of collection. The levy rates set at the beginning of 2006/07 resulted in collections of around £0.2m more than planned. This excess will be used to set levy rates for 2007/08 which will be lower than would otherwise have been the case.

Actuarial standards and regulation

Core operating costs

Our responsibilities for actuarial standards and regulation commenced during 2006/07. Core operating costs comprise the cost of BAS, the cost of the work undertaken by POB and AIDB in relation to actuarial matters, and a fair apportionment of the cost of our support services and corporate costs of £0.4m. The budget reflected a progressive build-up phase for our new responsibilities and our expenditure was marginally more than budgeted, due principally to staff costs. The average number of staff working on actuarial standards and regulation was 5.

Actuarial disciplinary case costs

The formalities relating to the extension of the scope of the AIDB's work to include actuarial costs are expected to be completed in the first half of 2007/08. There was no expenditure on cases in 2006/07.

Actuarial Standards and Regulation – Funding Requirement

The amount which we needed to collect in relation to our work on actuarial standards and regulation is as set out below:

Actual 2006/07 £m Budget 2006/07 £m
Core operating costs 1.4 1.3
Actuarial disciplinary case costs fund - 0.2
Recovery of set-up costs 0.3 0.2
Total 1.7 1.7

Actuarial disciplinary case cost fund

As set out in our Financial Management and Reporting Framework, it is our intention to establish a fund to cover actuarial disciplinary case costs and it was our intention to raise an initial contribution of £0.2m in 2006/07. In view of the delay in completing the legal formalities relating to the extension of the AIDB's responsibilities to include actuarial cases, this fund will not now be established until 2007/08.

Recovery of set-up costs

We incurred set-up costs of £0.3m when we assumed responsibility for actuarial standards and regulation in 2005/06 and it was our intention to recover this over three years starting in 2006/07. We have taken advantage of the delay in establishing the actuarial disciplinary case costs fund to accelerate the recovery of these costs. The balance of costs to be recovered is less than £0.1m and this will be recovered in 2007/08 and 2008/09.

The levies for actuarial standards and regulation for 2006/07

The funding of our work on actuarial standards and regulation comes from the actuarial profession (10%), insurance companies (45%) and pension funds (45%). A total of £1.7m was receivable during 2006/07, which was very close to the amount planned.

Reserves

The Directors believe it is prudent to maintain reserves to meet unforeseen circumstances in recognition of the fact that the FRC has entered into a number of long-term commitments. The target level of reserves is kept under review by the Directors. At 31 March 2007 our General Fund showed a surplus of £1.1m compared to a surplus of £1.0m as at 31 March

  1. The Directors believe that the level of reserves is appropriate but will continue to keep the level under review.

5. Performance Assessment

We have assessed three aspects of our performance:

  • the outcomes we are seeking
  • our outputs in terms of the activities and projects we have taken forward
  • our effectiveness.

Outcomes

We assess the outcomes of our work through:

  • an annual survey of confidence in corporate reporting and governance (the most recent survey was conducted on our behalf by Ipsos MORI in March 2007)
  • the evidence we obtain from our monitoring and enforcement activities.

The following sections of the report set out the evidence we have obtained, together with the results of the Ipsos MORI survey, in relation to corporate governance, corporate reporting, auditing, actuarial information, and the integrity, competence and transparency of the accountancy and actuarial professions.

The sequence of outcomes follows that set out in our Strategic Framework.

Outcome One – Corporate Governance

Our 2007 survey evidence showed the following levels of confidence in corporate governance:

2007 2006 2005
Very confident % Fairly confident % Very confident % Fairly confident % Very confident % Fairly confident %
Directors 36 59 31 63 24 68
Investors 29 66 22 70 12 82
Auditors 28 64 10 78 n/a n/a

Our 2005 report on the implementation of the Combined Code found that overall the Code was bedding down well and having a positive impact on confidence in corporate governance, contributing to improvements in corporate governance practice and disclosure and greater engagement between boards and shareholders. The report identified a number of issues that were to be kept under review.

During 2006/07, the FRC Chair held a series of meetings with company chairs and senior investors to hear their views on the impact of the Combined Code and the effectiveness of the UK's corporate governance framework. The feedback from these meetings was broadly positive and confirmed that there was general support for the UK's “comply or explain" approach. The Code was considered to be working reasonably well, though concerns were raised about “box-ticking" and the potential compliance costs for smaller listed companies.

During 2007/08, we will conduct a review of the impact of the Code to consider whether it is appropriately enabling UK listed companies to be led in a way that facilitates entrepreneurial success and the management of risk (Outcome One of our Strategic Framework).

Outcome Two – Corporate Reporting

Our 2007 confidence survey showed the following level of confidence in corporate reporting:

2007 2006 2005
Very confident % Fairly confident % Very confident % Fairly confident % Very confident % Fairly confident %
Directors 52 42 36 60 32 63
Investors 36 58 26 68 22 76
Auditors 44 54 24 68 n/a n/a

The FRRP reviewed 312 sets of accounts in the year to 31 March

  1. 20 sets of accounts were also subject to restricted review in respect of their pensions disclosures.

In August 2006, the FRRP published the results of its review into disclosures of defined benefit pension schemes in annual accounts. The review evaluated the completeness and clarity of disclosures provided by companies reporting under IFRS or UK GAAP. The report identified some ways in which the quality of reporting could be improved.

In October 2006, the FRRP published an activity report summarising the results of the reviews it had conducted during the year to 31 March 2006 and which had been prepared under UK GAAP. 284 sets of accounts, including 76 interim reports, were reviewed. Of these, 82 companies were approached for further information leading to 49 companies undertaking to reflect the Panel's comments in future accounts. The Panel found no evidence of systemic weakness as a result of its reviews. The improvements it agreed with companies were considered to enhance the clarity and quality of corporate reporting rather than address inappropriate accounting treatments.

In December 2006, the FRRP published a report on its preliminary findings in respect of IFRS implementation by UK listed companies in their annual accounts. The Panel identified a number of recurring issues which it drew to the attention of companies to help in their planning of their next IFRS annual accounts.

The FRRP issued three press notices in the period in respect of its reviews of company accounts where the matters at issue were such as to be brought to the market and users' attention. A generic press announcement was also made to draw attention to a trend that the Panel had identified in the accounts of certain companies in the oil and gas industry relating to their accounting for material acquisitions and which it found inappropriate.

The ASB's first review of narrative reporting by UK listed companies was published in January 2007 with the aim of keeping the spotlight on narrative reporting and the importance of encouraging continuing improvement in this area. In undertaking the review, the ASB analysed the annual reports of 23 listed companies, with a year-end of March 2006 or later (and so required to comply with the current legal provisions to prepare a Business Review). It also drew on surveys by a number of other organisations and the work of other parties with an interest in narrative reporting. Together these reviews of annual reports covered a significant number of the FTSE 350 leading quoted companies.

The review found that while most companies were good at describing their strategy and current performance, they were weaker on providing forward looking information and identifying their principal risks and how they are managed. The review noted that narrative reporting is still evolving and, whatever name is given to the narrative sections of the annual report, the overall impression is that there appears to be a willingness by many companies to go beyond strict legal requirements and to move towards best practice reporting. The ASB hopes that trend will continue.

Outcome Three - Auditing

Our 2007 confidence survey showed the following level of confidence in auditing:

2007 2006 2005
Very confident % Fairly confident % Very confident % Fairly confident % Very confident % Fairly confident %
Directors 53 42 41 53 37 50
Investors 27 67 20 66 20 70
Auditors 70 30 38 58 n/a n/a

In July 2006, the AIU issued its second public report covering the principal issues arising from its 2005/6 audit quality inspections of the four largest UK audit firms and the five other UK firms with a significant number of audit clients within the AIU's remit. The report stated that the quality of auditing in the UK was considered to be fundamentally sound, while identifying various areas in which improvements needed to be made by some or all of the firms. It also stated that the progress made by each of the firms in implementing recommendations for improvement would be reviewed during 2006/7. The report is available on the FRC website at: www.frc.org.uk/pob/audit/publications.

In the year to 31 March 2007 the AIU completed or commenced further inspections of all nine firms. Inspections of two of the “Big 4” firms were conducted jointly with the US Public Company Accounting Oversight Board, by agreement with the firms concerned, but led by the AIU. In addition, the AIU reviewed for the first time a sample of audits within scope undertaken by other UK audit firms.

The AIU will report publicly on the key findings and themes arising from its 2006/7 inspections, and the progress made by firms in implementing prior year recommendations, in the summer of 2007.

Outcome Four – Actuarial Practice

Our 2007 confidence survey showed the following level of confidence in the reliability of actuarial information.

2007 Reported change in confidence over the last four years
Very confident % Fairly confident % Increased % Stayed the same % Decreased %
Insurance Directors 22 33 22 67 11
Pension scheme trustees/managers 31 62 18 72 10
Actuaries 38 43 38 38 10

This is the first year in which the FRC has assessed the level of confidence in actuarial information, following the commencement of our responsibilities for actuarial standards and regulation in April 2006.

One of the recommendations of the Morris review was that the FRC should, within 2-3 years, satisfy itself that appropriate monitoring and scrutiny of actuaries is occurring. The POB established arrangements with the profession and the relevant statutory regulators to assess the existing monitoring systems as the initial phase of this review which is continuing into 2007/08.

The BAS and the POB have also worked together on a number of initiatives to help institutional recipients and users of actuarial information know what the main drivers of quality are and be proactive in challenging the quality of the actuarial information they achieve. These include an FRC survey of the needs of the principal users of actuarial services, with input from the FRC's new Actuarial Stakeholder Interests Working Group, and consideration of the drivers of quality in actuarial practice, which will also continue into 2007/08.

Outcome Five – Professionalism of accountants and actuaries

Accountants

Our 2007 confidence survey showed the following levels of confidence in the integrity and competence of the accountancy profession:

The integrity of the accountancy profession

2007 Reported change in confidence over the last four years
Very confident % Fairly confident % Increased % Stayed the same % Decreased %
Directors 71 28 20 77 2
Investors 33 62 11 71 15
Auditors 90 10 36 62 0

The competence of the accountancy profession

2007 Reported change in confidence over the last four years
Very confident % Fairly confident % Increased % Stayed the same % Decreased %
Directors 50 46 24 67 8
Investors 35 60 13 73 11
Auditors 72 28 48 48 2

The POB followed up with the professional accountancy bodies their response to and implementation of the recommendations in three previously published reports on important areas of their regulation of accountants – on Training and Education in the Accountancy Profession (April 2005), on the Procedures for Complaints and Discipline (February 2005) and on How Accountants Support the Needs of Small and Medium-sized Companies and their Stakeholders (March 2006).

In November 2006, the POB published a new edition of 'Key Facts and Trends in the Accountancy Profession' (available on the FRC website at: www.frc.org.uk/pob/publications). This brings together in one place a range of information both on the major accountancy bodies and on the major audit firms. The POB reported that the overall picture presented by the Survey was of an accounting profession in good health with the numbers of students and members continuing to grow.

Actuaries

Our 2007 confidence survey showed the following levels of confidence in the integrity and competence of the actuarial profession:

The integrity of the actuarial profession

2007 Reported change in confidence over the last four years
Very confident % Fairly confident % Increased % Stayed the same % Decreased %
Insurance Directors 56 33 22 67 11
Pension scheme trustees/managers 54 46 11 87 3
Actuaries 71 24 15 71 14

The competence of the actuarial profession

2007 Reported change in confidence over the last four years
Very confident % Fairly confident % Increased % Stayed the same % Decreased %
Insurance Directors 22 56 22 67 11
Pension scheme trustees/managers 38 62 15 82 3
Actuaries 57 38 39 43 19

In December 2006, the POB reported on its review of the Actuarial Profession's progress in implementing the recommendations made to it by the Morris Review. This was the first report by the POB covering its new responsibility for independent oversight of the actuarial profession, which it assumed in April 2006 as part of the package of reforms recommended by Sir Derek Morris's Review of the Actuarial Profession in March 2005.

Given the time required for these new procedures to take effect, it was not appropriate for the POB to report on whether the Morris Review's desired outcomes had been achieved through the implementation of its recommendations. The POB's follow-up work will include an assessment of the direct impact of recent reforms on features such as pass rates and qualification times, as well as indirect impacts on the competence of actuaries, the quality of their work and compliance with professional and ethical standards.

The review also identified areas where the POB believes that the Profession should do more, and matters it considers important which go beyond the analysis in the Morris Review. In particular it will look to the Profession to make substantive progress in the coming year in the areas of ethical principles and CPD requirements for actuaries performing roles which are reserved to Fellows of the Faculty or Institute of Actuaries, and in topical areas such as mortality projections.

Outputs

We have assessed our outputs by reference to our published Plan & Budget for 2006/07.

Sections Two and Three of this report and the supplementary report on our website demonstrate that we have substantially completed or made significant progress on the activities and projects included in our Plan.

Effectiveness

We have assessed three aspects of our effectiveness:

  1. Our adherence to our regulatory principles:

We work on the basis that a well-informed market is the best regulator.

We have published, in consultation with our stakeholders, a Strategic Framework which sets out the outcomes and other elements which we believe contribute to well-founded confidence in corporate reporting and governance. This Framework emphasises the importance of a proportionate approach by the FRC and other regulatory authorities and is based on our market-led approach to regulation.

We target the use of our powers, taking a proactive, risk-based and proportionate approach, making effective use of Regulatory Impact Assessments and having particular regard to the impact of regulation on small enterprises.

In May 2006, we published on our website a statement of the FRC approach to the preparation of regulatory impact assessments at: www.frc.org/about. During 2006/07, we have continued to take account of the impact of our proposals on the regulated community.

We emphasise principles and clarity in our standard-setting and rule-making and seek to ensure, as far as it is appropriate to do so, that we are consistent with international standards.

The accounting, auditing, reporting and actuarial standards issued in 2006/07 were in general principles-based. In influencing international-setting, we have emphasised the importance of a principles-based approach. We are consultative

  • involving preparers, auditors, actuaries, users of corporate reports and other regulatory organisations in our decision-making and allowing adequate time for consultation, without compromising our independence or confidentiality.

We have consulted in a timely and effective way on significant proposals during the course of the year and have taken account of stakeholder responses in finalising our proposals.

We recognise the importance of professional judgement in the way in which standards and rules are applied and enforced.

We have continued to lead the debate on the significance of the “true and fair" view.

Where we discharge a judicial or quasi-judicial function, we do so in accordance with our formal powers and the rules of natural justice.

We have undertaken our investigative and disciplinary functions in line with the rules of the AIDB scheme and the rules of natural justice.

We are transparent, accountable and efficient in our work, and ensure that it receives appropriate publicity.

See sections (b) and (c) below.

  1. Our accountability

In December 2005, we published our draft Plan for 2006/07. In May 2006 we published our revised Plan taking account of the feedback we received, which we summarised in a statement on our website.

We asked Ipsos MORI to include in the annual confidence survey they undertake on our behalf questions on respondents' understanding of our role and the extent to which they show us favourably or otherwise. They included similar questions in last year's survey.

The survey also found an improvement in awareness of the work of the FRC and in our communications but that we continue to need to do more in relation to the investor community.

Understanding of the FRC's role:

2007 2006
Well understood % Not well understood % Well understood % Not well understood %
Directors 71 29 64 36
Investors 29 71 32 68
Auditors 88 12 70 30

Overall view of the FRC:

2007 2006
Favourable % Neutral or no view % Unfavourable % Favourable % Neutral or no view % Unfavourable %
Directors 40 49 11 37 52 11
Investors 32 67 2 30 68 2
Auditors 64 24 10 56 42 2

We see the publication of our Strategic Framework as a way of facilitating co-operation between our wide range of stakeholders to promote well-founded confidence in corporate reporting and governance in the UK.

  1. Managing our finances effectively

We explained in section Four of this report that we believe that the cost of our core operating activities is the best indicator of our effectiveness in managing our costs. Section Four explains that our operating costs exceeded the budget by £0.6m in 2006/07 as a result of the AIDB cost award of £1.0m. Excluding the AIDB cost award, core operating costs would have been £0.4m below budget.

Annex A – Directors' Report and Accounts for the year ended 31 March 2007

Financial Reporting Council Limited – Company number 2486368

Page
Directors' Report 36
Statement of Directors' Responsibilities 42
Independent Auditors' Report to the Members of the Financial Reporting Council Limited 43
Consolidated Income and Expenditure Accounts 45
Statement of Total Recognised Gains and Losses 46
Balance Sheets 47
Consolidated Cash Flow Statement 48
Notes to the Financial Statements 49

Directors' Report

The Directors have pleasure in presenting their report and financial statements for the year ended 31 March 2007.

Principal Activity

The aim of the FRC is to promote confidence in corporate reporting and governance. The functions we carry out in pursuit of this aim are exercised principally by our Operating Bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Professional Oversight Board, the Financial Reporting Review Panel and the Accountancy Investigation and Discipline Board) and by the Council. The Committee on Corporate Governance, whose members are drawn from the Council, assists it in its work on corporate governance. The Operating Bodies and the Council are supported by the FRC's professional staff (the “Executive”). Our organisational structure is shown in Annex C.

Board of Directors

All Directors, with the exception of the Chief Executive, are appointed by the Secretary of State for Trade and Industry.

  • *Sir Christopher Hogg Chair
  • *+The Hon Barbara Thomas Judge Deputy Chair
  • Paul Boyle Chief Executive
  • *+Tim Breedon Group Chief Executive, Legal and General
  • *+Paul Druckman FCA Chairman, Clear Group
  • *+Sir John Sunderland Chairman, Cadbury Schweppes

The Directors who are also members of the Nominations and Remuneration Committees are indicated by * and the Audit Committee are indicated by †.

Under the terms of the FRC's Memorandum and Articles of Association, all Directors are members of the FRC and each has undertaken to guarantee the liability of the FRC up to an amount not exceeding £1. There are no other members and no dividend is payable.

Attendance at Board meetings during the year is shown below, with the attendance shown as a proportion of the numbers of meetings individual Directors were eligible to attend:

  • Sir Christopher Hogg 7/7
  • The Hon Barbara Thomas Judge 7/7
  • Paul Boyle 7/7
  • Tim Breedon 5/7
  • Paul Druckman FCA 7/7
  • Sir John Sunderland 6/7

Committees of the Board

Nomination Committee

The Nomination Committee consists of the Directors of the FRC, other than the Chief Executive, and was chaired by Sir Christopher Hogg. It is responsible for the selection process and succession planning for members and observers of the Council and members of the Operating Bodies. The Committee is also responsible for the oversight of the selection process of the Company's senior management. During the year, the Committee approved 38 appointments and re-appointments to the Council and Operating Bodies including the Board for Actuarial Standards and 3 senior management appointments.

The Nomination Committee met three times during the year. Attendance was as shown below:

  • Sir Christopher Hogg 3/3
  • The Hon Barbara Thomas Judge 3/3
  • Tim Breedon 2/3
  • Paul Druckman FCA 3/3
  • Sir John Sunderland 3/3
Remuneration Committee

The Remuneration Committee consists of the Directors of the FRC, other than the Chief Executive, and is chaired by Sir John Sunderland. It is directly responsible for determining and reviewing the remuneration policy for the FRC. It sets the remuneration of the Chief Executive, the remuneration for Chairs and members of the Operating Bodies, and approves the remuneration recommendations of the Chief Executive for the senior management team.

The Remuneration Committee met twice during the year. Attendance was as shown below:

  • Sir John Sunderland 2/2
  • Sir Christopher Hogg 2/2
  • The Hon Barbara Thomas Judge 1/2
  • Tim Breedon 2/2
  • Paul Druckman FCA 1/2
Audit Committee

The Audit Committee consists of the Directors of the FRC, other than the FRC Chairman and Chief Executive, and is chaired by Paul Druckman. It is responsible for monitoring the quality and integrity of the accounting, auditing, and reporting practices of FRC Ltd and its subsidiaries. The Committee's purpose is to scrutinise the accounting and financial reporting processes of the Group and Company and the audits of the Group and Company's financial statements. It reviews the qualifications and the performance of the public accounting firm engaged as the independent auditors in the preparation and issue of the audit report on the financial statements. The Committee considers the appointment, compensation, retention and oversight of the independent auditor, making recommendations to the Board on these matters.

The Committee met four times during the year. Attendance was as shown below:

  • Paul Druckman FCA 4/4
  • The Hon Barbara Thomas Judge 3/4
  • Tim Breedon 4/4
  • Sir John Sunderland 4/4

The FRC is a small organisation with a relatively small proportion of its staff having a role in the financial reporting processes. The Committee has reviewed the need for an internal audit function and concluded that it would be neither necessary nor cost effective for the FRC.

The independent auditor has in the year provided some non-audit services to the FRC. Objectivity and independence has been safeguarded through a robust process to avoid conflicts of interest and requiring the partners and staff of the auditors to declare their independence on an annual basis. The Committee are agreed that the objectivity of the audit engagement partners and audit staff are not impaired.

Following a re-tendering process the Committee agreed during 2006 that Horwath Clark Whitehill LLP should be reappointed as auditors. Horwath Clark Whitehill LLP will be proposed for re-appointment for the financial year 2007/08.

FRC Council

The Council has up to 30 members (including the 6 Directors of FRC Ltd and the Chairs of the Operating Bodies) and in addition a number of observers from other bodies with an interest in the work of the FRC. It has wide and balanced representation from the business, investor, professional and other communities with an interest in corporate reporting and governance.

Staff

The Company values the involvement of its employees in its affairs, policy development and performance. Feedback from staff on Company affairs and performance is encouraged through regular team and staff meetings presided over by their senior manager and the Chief Executive respectively. Staff participate in HR policy development through focus groups and consultation.

The Company recruits staff on the basis of fair and open competition and selection on merit. Applications are invited from suitably qualified people without regard to gender, disability, ethnicity, sexual-orientation, nationality, age or religion. The Company strives towards best practice in its HR policies, and is aware of and tries to ensure a reasonable work-life balance amongst its employees, and strives toward best practice.

The Company appreciates its responsibilities to protect the health and safety of its employees and enhance their potential through targeted training, professional and personal development. The Company regards it as a fundamental right for everyone to be able to work in an environment which is free of harassment and discrimination, and does not tolerate any form of unacceptable behaviour.

Business and Financial Review

The activities of the FRC during 2006/07 and the expected developments in 2007/08 are summarised on pages 1 to

  1. Since the FRC is a not-for-profit organisation and does not sell goods or services, the Directors consider that non-financial factors are of greater relevance than financial key performance indicators to an understanding of the performance of the company. An assessment of the performance of the FRC is set out on pages 26 to 34. However, the Directors do attach particular importance to the level of core operating costs as the primary indicator of the FRC's effectiveness in managing its costs. A comparison of core operating costs against budget and against the previous year is shown on page 21.

Total operating expenditure was £15,599,000 (2005/06 £11,893,000). Investigation costs of £14,000 were charged to the Legal Costs Fund during the year (2005/06 £11,000). The Legal Costs Fund may be used only to meet legal, professional and other costs of the FRRP's investigations.

Gross income from publications was £765,000 (2005/06 £822,000). Interest, including interest on the Legal Costs Fund, has been used to offset general operating costs, and amounted to £287,000 before taxation (2005/06 £275,000).

The Company obtained funding for the year from the following organisations:

  • Department of Trade and Industry
  • Consultative Committee of Accountancy Bodies
  • Listed companies
  • Actuarial Profession
  • Insurance companies
  • Pension schemes

Contributions from sponsors under the tri-partite funding arrangement for operating costs and capital expenditure for accounting, auditing and corporate governance amounted to £10,182,000 (2005/06 restated £9,583,000). £153,000 (2005/06 £250,000) of the income relating to capital expenditure, was deferred in accordance with SSAP 4 (Accounting for government grants). £314,000 of the deferred income has been released in year (2005/06 £273,000).

£11,000 was received during the year from sponsors earmarked for the Legal Costs fund as these costs were incurred in 2005/06. As is indicated in Note 7 to the accounts, sponsors' contributions to make good drawings on the Legal Costs Fund are not sought until the financial year following the drawings.

The audit inspection and the investigation and discipline case costs were funded entirely by the relevant CCAB bodies.

Contributions from sponsors under the tri-partite funding arrangement for operating costs and capital expenditure for actuarial standards and regulation amounted to £1,679,000 (2005/06 nil).

There was a surplus for the year on general activities of £117,000 (2005/06 restated £1,263,000). The accumulated surplus at 31 March 2007 was £1,070,000 (2005/06 restated £953,000).

The principal risks and uncertainties facing the company are as follows:

  • The continued willingness of funders to contribute to the costs of the Company's activities
  • The potential for awards of costs relating to the enforcement activities undertaken by certain of the Company's Operating Bodies.

The Directors keep these risks and uncertainties facing the company under review and believe that appropriate steps to mitigate them have been taken or are planned.

Directors' Emoluments

The Directors' remuneration, with the exception of the Chief Executive, are determined and reviewed by the Secretary of State for Trade and Industry. The total remuneration and benefits excluding pension contributions received by Directors is shown in the table below. Unless indicated otherwise all Directors served throughout each of the two financial years.

2006/07 2005/06
£'000 £'000
Sir Christopher Hogg 130,000 32,500 (3 months)
Sir Bryan Nicholson 75,000 (9 months)
The Hon Barbara Thomas Judge 20,000 20,000
Paul Boyle 312,783 74,714 (3½ months)
Tim Breedon 15,000 15,000
Paul Druckman FCA 15,000 15,000
Sir John Sunderland 15,000 15,000

The only Director who is entitled to receive pension benefits is the Chief Executive, in respect of whom contributions of £25,707 were paid to a personal pension arrangement.

Other matters

The Company's policy and practice is to make payments to creditors on a weekly basis. No contributions were made for political or charitable purposes. The Company is not listed; consequently there are no directors' shareholdings and no acquisition by the company of its own shares.

We, the Directors listed above, at the date of this report, confirm that, as far as we are aware there is no relevant audit information of which the company's auditors are unaware. The Directors have taken all necessary steps to make themselves aware of any relevant audit information and to establish that the company's auditors are aware of that information.

BY ORDER OF THE BOARD

Anne McArthur Company Secretary 22 May 2007

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The financial statements are required by law to give a true and fair view of the state of affairs of the Company and Group and of the surplus or deficit of income over expenditure of the Group for that period. In preparing these financial statements, the Directors are required to:

  • select suitable accounting policies and apply them consistently;
  • make judgments and estimates that are reasonable and prudent;
  • state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
  • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of each Company and enable them to ensure that the financial statements comply with the Companies Act
  1. They are also responsible for safeguarding the assets of each Company and hence taking reasonable steps for the prevention and detection of fraud or other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Independent Auditor's Report to the Members of the Financial Reporting Council Limited

We have audited the group and company financial statements (“the financial statements") of the Financial Reporting Council Limited for the year ended 31 March 2007 which comprise the consolidated income and expenditure account, the statement of total recognised gains and losses, the group and company balance sheets, the consolidated cash flow statement and the related notes numbered 1 to

  1. These financial statements have been prepared in accordance with the accounting policies set out therein. This report is made solely to the company's members, as a body, in accordance with Section 235 of the Companies Act

  2. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and Auditors

As described in the Statement of Directors' Responsibilities the company's directors are responsible for the preparation of the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view, the financial statements are properly prepared in accordance with the Companies Act 1985 and the information given in the directors' report is consistent with the financial statements. We also report to you if, in our opinion, the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed.

We read other information contained in the Annual Report, and consider whether it is consistent with the audited financial statements. The other information comprises only the Chair's statement, Chief Executive's Report, Operating Body and Committee on Corporate Governance reports, the reports headed "Expenditure and Funding" and "Performance assessment" and Annexes B to F. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information beyond that referred to in this paragraph.

Basis of audit opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the group's and company's circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

Opinion

In our opinion:

  • the financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the group's and the parent company's affairs as at 31 March 2007 and of the group's surplus of income compared to expenditure for the year then ended;
  • the financial statements have been properly prepared in accordance with the Companies Act 1985; and
  • the information provided in the directors' report is consistent with the financial statements.

Horwath Clark Whitehill LLP Chartered Accountants and Registered Auditors London 22 May 2007

Consolidated Income and Expenditure Accounts

Notes 2006/07 2005/06
£'000 Restated
£'000
OPERATING EXPENDITURE
Staff costs 2 9,998 7,470
Other operating charges 4 3,991 3,717
Credit for onerous lease 5 & 17 (315) (188)
Costs awarded against AIDB 6 988
AIDB case costs 923 538
FRRP case costs 7 14 11
Actuarial standards & regulation set-up costs 8 345
TOTAL OPERATING EXPENDITURE 15,599 11,893
Income from publications (765) (822)
Interest receivable 9 (287) (275)
Other finance costs 17 42 67
NET OPERATING EXPENDITURE 14,589 10,863
CONTRIBUTIONS FROM SPONSORS FOR:
Core operating costs 10 10,343 9,606
AIU costs 2,131 1,702
Actuarial standards & regulation costs 1,378
AIDB case costs 923 538
FRRP case costs 7 11
Actuarial standards & regulation set-up costs 8 345
TOTAL CONTRIBUTIONS FROM SPONSORS 14,786 12,191
SURPLUS/(DEFICIT) ON ORDINARY ACTIVITIES BEFORE TAXATION
Accounting, auditing & corporate governance 200 1,339
Actuarial standards & regulation
FRRP legal costs fund 7 (3) (11)
197 1,328
TAXATION 11 (83) (76)
SURPLUS OF INCOME OVER EXPENDITURE FOR THE FINANCIAL YEAR
Accounting, auditing & corporate governance 117 1,263
Actuarial standards & regulation
FRRP legal costs fund 7 (3) (11)
18 114 1,252

The notes on pages 49 to 60 form part of these financial statements.

Statement of Total Recognised Gains and Losses

Notes 2006/07 2005/06
£'000 Restated
£'000
Surplus for the financial year 114 1,252
Prior year adjustment 10 270
Total gains and losses recognised since last annual report 384

The notes on pages 49 to 60 form part of these financial statements.

Balance Sheets

Group Company
2007 2006 2007 2006
Notes £'000 Restated £'000 Restated
£'000 £000
FIXED ASSETS
Tangible assets 12 1,027 1,199 1,027 1,199
CURRENT ASSETS
Debtors:
falling due within one year 13 1,610 1,149 1,610 1,149
falling due after more than one year 13 239 239
Cash at bank and in hand:
General 14 2,728 2,888 2,728 2,888
FRRP legal costs fund 14 1,999 2,012
4,727 4,900 2,728 2,888
6,337 6,288 4,338 4,276
CREDITORS:
Amounts falling due within one year 15 (3,228) (1,938) (3,215) (1,915)
NET CURRENT ASSETS 3,109 4,350 1,123 2,361
TOTAL ASSETS LESS CURRENT LIABILITIES 4,136 5,549 2,150 3,560
CREDITORS:
Amounts falling due after more than one year 16 (915) (1,158) (915) (1,158)
PROVISIONS FOR LIABILITIES 17 (165) (1,449) (165) (1,449)
NET ASSETS 3,056 2,942 1,070 953
CAPITAL AND RESERVES
Accumulated surplus 18 1,070 953 1,070 953
FRRP legal costs fund 7 & 18 1,986 1,989
3,056 2,942 1,070 953

Approved by the Board of Directors on 22 May 2007 and signed on its behalf by:

Sir Christopher Hogg, Chairman Paul Boyle, Chief Executive

The notes on pages 49 to 60 form part of these financial statements.

Consolidated Cash Flow Statement

Notes 2006/07 2005/06
£'000 £'000
NET CASH OUTFLOW FROM OPERATING ACTIVITIES 19 (382) (312)
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 287 275
TAXATION
Corporation Tax paid (78) (50)
CAPITAL EXPENDITURE
Cash paid for fixed assets (153) (250)
Contributions from sponsors towards capital expenditure 153 250
Proceeds from disposal of fixed assets 5
- 5
NET CASH OUTFLOW BEFORE AND AFTER FINANCING (173) (82)
DECREASE IN CASH IN THE YEAR 14 (173) (82)
RECONCILIATION OF MOVEMENT IN NET FUNDS
Net funds at 1 April 2006 4,900 4,982
Decrease in cash in the year (173) (82)
Net funds at 31 March 2007 4,727 4,900

Net funds consist solely of cash at bank

The notes on pages 49 to 60 form part of these financial statements.

1. ACCOUNTING POLICIES

The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Group's financial statements.

  1. ### Basis of Preparation The financial statements are prepared under the historical cost convention and in accordance with applicable United Kingdom Accounting Standards.
  2. ### Accounts presentation In order to reflect more fairly that the Group's expenditure is met by contributions from sponsors, the directors have presented the Income & Expenditure Account to focus initially on the group's net operational expenditure and funding requirement and thereafter on the various contributions received from its sponsors. Further categories have been included to provide a fairer representation of the company's income & expenditure.
  3. ### Basis of Consolidation The consolidated financial statements include the financial statements of the Company and its subsidiaries, after elimination of balances and transactions between members of the Group.
  4. ### Contributions from Sponsors Contributions from sponsors towards general operational expenditure, FRRP legal costs (note 7), AIDB case costs and AIU costs are credited to the Income and Expenditure Account when they become receivable. Contributions in respect of AIDB case costs and AIU costs are set out at a level which precisely matches the costs incurred in each financial year. The contributions in respect of FRRP legal costs are set at a level which meets the costs incurred in the preceding financial year. The contributions in respect of core operating costs are determined primarily by reference to budgeted expenditure and are likely to differ from the actual expenditure incurred in each financial year. Contributions from sponsors towards capital expenditure are included as deferred income and are credited to the Income and Expenditure Account over the expected useful life of the relevant tangible fixed assets on a basis consistent with the depreciation policy applied in respect of those assets.
  5. ### Case Costs The legal and professional costs of AIDB and FRRP cases cannot be estimated with reasonable certainty until the investigation is substantially complete. Provision is made to the extent that costs have been incurred at the balance sheet date. Legal and professional investigation costs of FRRP cases are charged to the Legal Costs Fund.
  1. ### Depreciation Depreciation is provided on all tangible fixed assets at rates calculated to write off the cost, less estimated residual value, over their expected useful lives, as follows:
    | | | | |:------------------|:------------|:---------------------| | Office equipment | 3 years | straight line basis | | Fixtures, Fittings & Furniture | 5 years | straight line basis | | Leasehold improvements | term of lease | straight line basis |
  2. ### Leased Assets Total rentals payable under operating leases are charged to the Income and Expenditure account over the term of the lease on a straight line basis.
  3. ### Dilapidations Provision is made for the estimated costs of dilapidation repairs. Estimated costs of removing leasehold improvements are provided and capitalised in accordance with FRS15, such expenditure being amortised over the term of the lease.
  4. ### Deferred Taxation The Group is only subject to Corporation Tax on its interest receivable and analogous income. There is no timing difference between the recognition of that income in the financial statements and the tax computation, and no timing differences arise. Accordingly, there is no provision for deferred tax.

2. STAFF COSTS (INCLUDING DIRECTORS)

2006/07 2005/06
£'000 £'000
Permanent staff:
Salaries 6,261 4,998
Social security costs 764 595
Other pension costs 378 287
7,403 5,880
Seconded staff and contractors 1,470 893
Fees to operating body and committee members 957 560
Other costs 168 137
9,998 7,470

The Group does not operate a pension scheme. Other pension costs comprise payments to personal pension schemes.

The average monthly number of employees during the year was as follows:

2006/07 2005/06
No. No.
ASB 13 13
AIU 16 13
APB 6 6
FRRP 10 7
POB 9 6
AIDB 4 4
BAS 3 -
Support Services and Corporate 15 13
76 62

3. DIRECTORS' EMOLUMENTS

2006/07 2005/06
£'000 £'000
Fees and salaries (included in staff costs) 508 247

Details of the emoluments of the directors are contained in the Directors' Report on page 41.

4. OTHER OPERATING CHARGES

2006/07 2005/06
£'000 £'000
Depreciation (note 12) 325 284
Operating leases (note 1g)
- office equipment 7 6
- land and buildings 448 448
Gain on disposal of fixed assets (3)

The auditors' remuneration is as follows:

2006/07 2005/06
£'000 £'000
Fees payable to the company's auditors for the audit of the company's annual accounts 7 5
Fees payable to the company's auditors for other audit services to the group:
The audit of the company's subsidiaries pursuant to legislation 16 14
Total audit fees 23 19
Other services
- Tax services 3 3
- Payroll services 9 6
Total non-audit fees 12 9

5. CREDIT FOR ONEROUS LEASE

In 2004/05 the company assumed the obligations attaching to the leasehold property formerly occupied by the Accountancy Foundation, whose activities were transferred to the company as from 1st April

  1. This property is no longer occupied by the company and accordingly full provision was made in 2004/05 for the value of future net obligations. The provision was reassessed in 2005/06, resulting in a reduction in the provision of £188,000. In March 2007, the lease at Houndsditch was surrendered to the landlord and a settlement payment was made. In 2004/05 the Department of Trade and Industry (DTI) made an exceptional contribution of £1,000,000 in respect of these lease obligations on a condition that it may only be used for this purpose. As a result of the surrender of the lease, £532,000 became repayable to the DTI. The balance of the provision for the onerous lease was released to the income and expenditure account.

6. COSTS AWARDED AGAINST AIDB

During 2006/07 the AIDB's case relating to certain matters arising out of the collapse of the Mayflower Corporation Plc was completed. In January 2007, the independent tribunal made awards totalling £988,000 in respect of the costs incurred by two of the respondents in the case.

Contributions have been received to enable the Financial Reporting Review Panel to take steps to ensure compliance with the accounting requirements of the Companies Act 1985, including applicable accounting standards, and to investigate departures from those standards and requirements. Those funds may be used only for this purpose and may not be used to meet other costs incurred by the Group. The Financial Reporting Review Panel may be liable to repay the balance on the Legal Costs Fund to the contributors if it ceases to be authorised by the Secretary of State for Trade and Industry for the purposes of section 245B of the Companies Act 1985.

Since the costs of Review Panel investigations in a financial year cannot be forecast with sufficient certainty, sponsors' contributions to make good expenditure on the Legal Costs Fund are sought in the financial year following the expenditure.

2007 2006
The fund is represented by: £'000 £'000
Cash at bank and in hand 1,999 2,012
Amounts due from parent company 11
Taxation payable (24) (23)
At 31 March 1,986 1,989
2006/07 2005/06
The movements in the fund during the year were as follows: £'000 £'000
Contributions from sponsors 11
Costs of Review Panel investigations and legal advice (14) (11)
(Deficit) for year (3) (11)

8. ACTUARIAL STANDARDS & REGULATION SET-UP COSTS

The costs incurred during 2005/06 in setting up the new regime for setting actuarial standards and overseeing the regulation of the actuarial profession were not covered by existing funding arrangements. It was agreed with HM Treasury to recover these costs through the funding arrangements for actuarial standards and regulation which were consulted upon and finalised during 2005/06. Recovery of £304,000 was made in 2006/07 and the balance will be recovered over the next two years.

9. INTEREST RECEIVABLE

2006/07 2005/06
£'000 £'000
Bank interest – general 193 184
Bank interest – FRRP legal costs fund (note 7) 94 91
287 275

Interest on the legal costs fund is used to offset general operating costs.

10. CONTRIBUTIONS FROM SPONSORS – CORE OPERATING COSTS

Contributions from sponsors towards core operating costs include £314,000 (2005/06 £273,000) of deferred income released in accordance with note 1(d).

The FRC has changed the application of its accounting policy relating to recognition of revenue from sponsors in respect of core operating costs to more appropriately reflect the operation of the funding arrangements under which the various categories of funds contribute specified proportions of the FRC's costs. In previous years, the amount of revenue recognised was adjusted at the end of each financial year so that the amount recognised equalled the specified proportions of the planned level of contributions, which was determined primarily by reference to the budgeted expenditure for the financial year. Following the extension of FRC's responsibilities to include Actuarial Standards and Regulation the Directors have concluded that this policy no longer most appropriately reflects the FRC's practice which is to take any difference between the actual and planned amounts receivable in each financial year into account in determining the target amounts receivable in future years.

The effect of this change has been to increase income from sponsors in 2006/07 by £221,000 compared to the previous accounting policy.

The comparative figures in respect of 2005/06 have been restated to reflect these amendments. As a result, the income for 2005/06 has been increased by £270,000 and other creditors reduced by the same amount, resulting in a corresponding increase in reserves at 31 March 2006.

11. TAXATION

2006/07 2005/06
£'000 £'000
Corporation Tax at 29% (2005/06: 26%) on general interest received 57 53
Corporation Tax at 25% (2005/06: 25% ) on interest
received by the FRRP legal costs fund (note 7) 24 23
Adjustment in respect of previous year 2
83 76

Tax is payable only on interest and analogous income.

12. TANGIBLE ASSETS

Leasehold Improvements Office Equipment Fixtures, Fittings & Furniture Total
£'000 £'000 £'000 £'000
Cost at 1 April 2006 655 524 437 1,616
Additions - 128 25 153
Cost at 31 March 2007 655 652 462 1,769
Depreciation at 1 April 2006 107 212 98 417
Charge for year 66 170 89 325
Depreciation at 31 March 2007 173 382 187 742
Net book value at 31 March 2007 482 270 275 1,027
Net book value at 31 March 2006 548 312 339 1,199

13. DEBTORS

Group Company
2007 2006 2007 2006
£'000 £'000 £'000 £'000
Amounts falling due within one year:
Trade debtors 663 96 663 96
Amount due from subsidiary undertaking - - 202 335
Other debtors 613 731 411 396
Prepayments and accrued income 334 322 334 322
1,610 1,149 1,610 1,149
Amounts falling due after one year:
Other debtors - 239 - 239
- 239 - 239

14. CASH AT BANK AND IN HAND

Company & Group General Accounts Group FRRP Legal Costs Fund Accounts Group Total
£'000 £'000 £'000
At 31 March 2006 2,888 2,012 4,900
Net cash outflow for 2006/07 (160) (13) (173)
At 31 March 2007 2,728 1,999 4,727

The amount in the FRRP legal costs fund accounts may be used only for the purposes described in note 7.

15. CREDITORS: amounts falling due within one year

Group Company
2007 2006 Restated 2007 2006 Restated
£'000 £'000 £'000 £'000
Trade creditors 750 283 750 283
Corporation tax payable 81 76 57 53
Due to subsidiary company - - 319 283
Accruals 1,041 908 1,041 908
Deferred income 443 302 443 302
Other creditors 913 369 605 86
3,228 1,938 3,215 1,915

16. CREDITORS: amounts falling due after more than one year

Group Company
2007 2006 2007 2006
£'000 £'000 £'000 £'000
Accruals 296 366 296 366
Deferred income 619 792 619 792
915 1,158 915 1,158

17. PROVISIONS FOR LIABILITIES

Group and Company Lease Obligations Leasehold Improvements Dilapidations Total
£'000 £'000 £'000 £'000
At 31 March 2006 1,247 110 92 1,449
Cash payments in the year (442) - - (442)
Unwinding of the discount 42 - - 42
Amount repayable to DTI (532) - - (532)
(Credit) to income and expenditure account (315) - (37) (352)
At 31 March 2007 - 110 55 165

The provision for lease obligations relates to the matter described in note 5.

Provisions have been made for obligations under the lease at Aldwych House. These are to remove the leasehold improvements and return the property at the end of the lease to its original state and to meet the tenant repairing clause for dilapidations.

18. ACCUMULATED SURPLUS OF INCOME OVER EXPENDITURE FOR THE FINANCIAL YEAR

The Company has taken advantage of the exemption conferred by section 230 of the Companies Act 1985 not to present its own individual income and expenditure account in these financial statements. The Company's surplus for the year was £117,000 (2005/06 £1,263,000). Changes in the Company and Group's capital and reserves were as follows:

Company & Group Accounting, auditing & corporate governance Company & Group Actuarial standards & regulation Company & Group General Fund Group FRRP Legal Costs Fund Group Total
£'000 £'000 £'000 £'000 £'000
At 31 March 2006 683 - 683 1,989 2,672
Accounting policy adjustment (Note 10) 270 - 270 - 270
Restated 31 March 2006 953 - 953 1,989 2,942
Surplus / (deficit) for 2006/07 117 - 117 (3) 114
At 31 March 2007 1,070 - 1,070 1,986 3,056

Contributions from Government in 2006/07 were £3,415,000 (2005/06: £3,100,000).

Differences between the actual and planned contribution receivable from the individual categories of sponsors are taken into account in planning contribution receivable from those sponsors in future years. As at 31 March 2007, the major difference was £221,000 more than planned from the listed companies in respect of accounting, auditing and corporate governance.

19. CASH FLOW STATEMENT - RECONCILIATION OF OPERATING RESULT TO NET CASH (OUTFLOW) / INFLOW FROM OPERATING ACTIVITIES

2006/07 2005/06
£'000 £'000
Surplus on ordinary activities before taxation 197 1,328
Interest receivable (287) (275)
Depreciation 325 284
Release of deferred income (314) (273)
Release of provision or onerous lease (315) (188)
Unwinding of the discount 42 67
Provision for dilapidations (37) 11
(Gain) on disposal of fixed assets - (3)
Increase in debtors (222) (891)
Increase / (decrease) in creditors and accruals 229 (372)
Net cash (outflow) from operating activities (382) (312)

20. COMMITMENTS

There were no capital commitments outstanding at 31 March 2007 (2006: nil).

At the balance sheet date, the annual commitment for the Group and the Company relating to its Aldwych leasehold property was £448,000. This lease extends beyond five years but there is a tenant's break clause in the lease with effect from August 2009.

Annual commitments for the Group and Company under non-cancellable operating leases other those relating to leasehold property are as follows:

2006/07 2005/06
£'000 £'000
Leases which expire within one year 7 6

21. SUBSIDIARY UNDERTAKINGS

Name

The Accounting Standards Board Limited ('ASB')

The Financial Reporting Review Panel Limited ('FRRP')

The Auditing Practices Board Limited ('APB')

The Accountancy Investigation and Discipline Board Limited ('AIDB')

The Professional Oversight Board Limited ('POB')

Activity

Contribute to confidence in corporate reporting and governance by:

Establishing and improving standards of financial accounting and corporate reporting.

Seeking to ensure that the provision by public and large private companies of financial information and other information falling within its remit complies with relevant reporting requirements.

Setting standards and giving guidance for: the performance of external audit and other activities undertaken by accountants that result in reports or other output that is published, required by law or otherwise relied on in the operation of the financial markets ("assurance services"); and in relation to the independence, objectivity and integrity of external auditors and the providers of assurance services.

Providing an independent body to investigate the conduct of members or member firms of the professional accountancy bodies and take disciplinary action in public interest cases – matters which raise or appear to raise important issues affecting the public interest.

Strengthening the independence and transparency of the regulatory regime for auditing and for the accountancy and actuarial professions.

The activities of these five subsidiaries are undertaken by unincorporated bodies established under the articles of association of each subsidiary. The Board for Actuarial Standards is established as an unincorporated body established under the articles of association of the Company.

22. LIABILITY OF MEMBERS

The members of the Company have undertaken to contribute a sum not exceeding £1 each to meet the liabilities of the Company if it should be wound up.

Annex B – Membership of Council, Operating Bodies and Committees

THE FINANCIAL REPORTING COUNCIL

Chair

Sir Christopher Hogg

Deputy Chair

The Hon Barbara Thomas Judge Chairman, UK Atomic Energy Authority, Deputy Chairman, Friends Provident

Directors

Paul Boyle Chief Executive, FRC

Tim Breedon Group Chief Executive, Legal and General

Paul Druckman FCA Chairman, Clear Group

Sir John Sunderland Chairman, Cadbury Schweppes

Members

Sir John Bourn KCB (ex officio) Chair POB

Richard Fleck (ex officio) Chair APB

Mike Fogden (ex officio) Chair AIDB

Bill Knight (ex officio) Chair FRRP

Ian Mackintosh (ex officio) Chair ASB

Paul Seymour (ex officio) Chair BAS

Charles Allen-Jones Formerly Senior Partner, Linklaters

John Alty Director General, Fair Markets, DTI

Sir Victor Blank Chairman Lloyds TSB Group plc

Sir David Clementi Chairman, Prudential plc

Sir Don Cruickshank Non Executive Director of Qualcomm Inc

Sir Christopher Gent Chairman of GlaxoSmithKline plc

Baroness Sarah Hogg Chairman, 3i Group plc

Douglas Kerr Group Finance Director, CPL Industries Ltd

Sir George Mathewson CBE Chairman, The Royal Bank of Scotland Group plc – to 5 October 2006

Colin Perry Chairman, LTE Scientific Ltd

Ian Robertson Group Chief Executive, Wilson Bowden plc, past President ICAS

Hector Sants Managing Director, Wholesale & Institutional Markets, Financial Services Authority

Vincent J Sheridan Chief Executive, Vhi Healthcare and Deputy President of ICAI

Ed Sweeney Joint Deputy General Secretary, Amicus – to 5 December 2006

Observers

Richard Dyson Deputy President, ICAEW to 6 December 2006, Chairman, ССАВ (and President, ICAEW) from 6 December 2006

Dr Clive Grace CIPFA Council Member and Chairman Supporta plc

Mary Keegan Managing Director, Government Financial Management, HM Treasury

Company Secretary

Michael Lewington to 31 May 2006

General Counsel and Company Secretary

Anne McArthur from 1 June 2006

The number of meetings individual Council members attended out of those which they were eligible to attend was as follows.
Sir Christopher Hogg 4/4 Sir Christopher Gent 1/4
The Hon Barbara Thomas Judge 4/4 Baroness Sarah Hogg 3/4
Paul Boyle 4/4 Douglas Kerr 2/4
Tim Breedon 4/4 Sir George Mathewson 1/2
Paul Druckman 4/4 Colin Perry 4/4
Sir John Sunderland 4/4 Ian Robertson 3/4
Sir John Bourn KCB 4/4 Hector Sants 3/4
Richard Fleck 3/4 Vincent J Sheridan 2/4
Mike Fogden CB 3/4 Ed Sweeney 1/2
Bill Knight 4/4 Rosemary Thorne 4/4
Ian Mackintosh 2/4 Lindsay Tomlinson 3/4
Paul Seymour 4/4 Graham Ward CBE 3/4
Charles Allen-Jones 4/4 Anthony Watson 4/4
John Alty 4/4 Richard Dyson 4/4
Sir Victor Blank 3/4 Clive Grace 3/4
Sir David Clementi 3/4 Mary Keegan 3/4
Sir Don Cruickshank 1/4

ACCOUNTING STANDARDS BOARD

Chair

Ian Mackintosh

Members

Mike Ashley Partner, KPMG LLP

Edward Beale Chief Executive, City Group plc – from 13 March 2007

Marisa Cassoni Finance Director, John Lewis Partnership

Peter Elwin Head of Accounting and Valuation Research, JP Morgan Cazenove (Cazenove Equities) – from 4 September 2006

David Loweth Technical Director, ASB

Roger Marshall Partner, PricewaterhouseCoopers LLP

Robert Overend Technical Partner, Ernst & Young LLP

Jonathan Symonds Chief Finance Director, AstraZeneca plc – to 31 August 2006

Helen Weir Group Finance Director, Lloyds TSB

Peter Westlake Nestlé SA. Former UK Head of Research, Deutsche Asset Management

Professor Geoffrey Whittington CBE Judge Business School, Cambridge University – from 4 September 2006

Observers

Mary Keegan Managing Director, Government Financial Management, HM Treasury

Geoffrey Dart Director, Corporate Law & Governance, Department of Trade and Industry

Ian Drennan Chief Executive, The Irish Auditing and Accounting Supervisory Authority – from 9 February 2006

Bob Garnett International Accounting Standards Board – from 3 July 2006

Secretary

David Loweth

AUDITING PRACTICES BOARD

Chair

Richard Fleck Partner, Herbert Smith LLP

Members

Prof. Andrew Chambers Director of Management Audit LLP – from 1 May 2006

Jon Grant Executive Director, APB

Lew Hughes CB Formerly Assistant Auditor General, UK National Audit Office

Keith Nicholson Partner, KPMG LLP

Ronan Nolan Partner, Deloitte Ireland

Graham Pimlott Chairman of Export Credit Guarantee Department

Minnow Powell Partner, Deloitte & Touche LLP

Will Rainey Partner, Ernst & Young LLP

David J. Thomas Head of Business Risk, Invensys plc

Tom Troubridge Partner, PricewaterhouseCoopers LLP

Stuart Turley Professor of Accounting, University of Manchester

Martin Ward Partner, Dodd & Co – from 1 May 2006

Observers

Ian Drennan Irish Auditing & Accounting Supervisory Authority

Richard Leyland Department of Trade and Industry

David Loweth Technical Director, Accounting Standards Board

Richard Thorpe Financial Services Authority

THE BOARD FOR ACTUARIAL STANDARDS

Chair

Paul Seymour Director BGI Endowment Fund II, SCOR Global Life Reinsurance UK Limited

Members

Mike Arnold Principal and Head of the Life Practice at Milliman in London

Nigel Bankhead Director, Actuarial Standards

David Blackwood Former Group Treasurer, ICI Group

Lawrence Churchill Chairman of the Pension Protection Fund and Senior Independent Director at The Children's Mutual and Monkton Group

Harold Clarke Independent General Insurance Consultant, formerly Actuarial Partner at Deloitte & Touche LLP

Christopher Daws Consultant to and Former Financial and Deputy Secretary, Church Commissioners; Trustee, NCH; Trustee – Director NCH Superannuation Fund

Steven Haberman Professor of Actuarial Science and Deputy Dean of Cass Business School, City University

Dianne Hayter Chair of the Consumer Panel of the Bar Standards Board, member of the Board of the National Consumer Council, the Insolvency Practices Council and the Determinations Panel of the Pensions Regulator, and formerly the Vice Chair of the Financial Services Consumer Panel

Julian Lowe Actuarial Director, Aviva GI

Jerome Nollet Corporate Finance Advisor in Risk and Capital management for the insurance industry

Tom Ross Senior Independent Director of Royal London Mutual Insurance Society

Sir Derek Wanless Chairman of the Audit and Risk Committees of Northern Rock plc, Vice Chairman, Statistics Commission

Martin Weale Director, National Institute of Economic and Social Research. Also a Statistics Commissioner and Hon. Treasurer of the Alzheimer's Research Trust

Observers

Peter Askins Head of Policy for Defined Benefit Pension Schemes, DWP

Jim Kehoe Consulting Actuary – representing Groupe Consultatif Actuariel Europeen

Sue Rivas Head of Defined Benefits, Research and Determinations Panel, The Pensions Regulator

Paul Sharma Head of Department for Risk Modelling and Review, FSA

Secretary

Anna Colban from 1 November 2006

PROFESSIONAL OVERSIGHT BOARD

Chair

Sir John Bourn KCB Comptroller and Auditor General of the United Kingdom

Members

Richard Barfield Director of Equitas, Umbro plc. Formerly Chief Investment Manager of Standard Life in Edinburgh

Tim Barker Director, Drax Group plc and Electrocomponents plc. Chairman, Robert Walters plc. Formerly Vice Chairman, Dresdner Kleinwort Benson

Anthony Carus Consulting Actuary in private practice and Director, Royal Liver Assurance Limited. Formerly Appointed Actuary, NFU Mutual Life Insurance Society – from 01 May 2006

David Crowther Formerly a Senior Partner, PricewaterhouseCoopers LLP, responsible for quality assurance and risk management. Non-Executive Director, TT Electronics plc. Member of the Board of the Financial Ombudsman Service

Hilary Daniels Formerly Chief Executive, West Norfolk Primary Care Trust and Interim Chief Executive, Norfolk Primary Care Trust

Roger Davis Formerly a partner and Head of Professional Affairs PricewaterhouseCoopers LLP. Member of the Competition Commission

Stella Fearnley Professor of Accounting, University of Portsmouth Business School

Paul George Director, POВ

Michael Jones Head of Management Services & Administration, Trades Union Congress

Anne Maher Formerly Chief Executive, The Pensions Board for Ireland. Board member of the Irish Auditing and Accounting Supervisory Authority and of Allied Irish Banks plc

Secretary

John Grewe

FINANCIAL REPORTING REVIEW PANEL

Chair

Bill Knight Formerly Senior Partner, Simmons & Simmons

Deputy Chair

Ian Brindle Formerly Chairman, PricewaterhouseCoopers LLP

Members

Daniel Abrams Formerly Chief Financial Officer CDT Inc. – from 01 March 2007

Charles Allen-Jones Formerly Senior Partner, Linklaters

Rupert Beaumont Formerly Partner, Slaughter and May

Sir John Bourn KCB Comptroller and Auditor General of the United Kingdom

Stephen Box Formerly Finance Director, The National Grid Group plc

Michael Brindle QC Barrister

David Cairns IFRS Consultant and Visiting Professor, London School of Economics

Anthony Carey Partner, Mazars

Jim Coyle Group Chief Accountant, HBOS plc – from 01 March 2007

Jimmy Daboo Partner KPMG LLP. Vice Chairman of KPMG's Global Energy and Natural Resources Practices – from 01 March 2007

Richard Delbridge Formerly Group Chief Financial Officer, NatWest Group

Martin Eadon Partner, Deloitte & Touche LLP

Christopher FitzGerald Formerly Chairman, Regulatory Decisions Committee, Financial Services Authority

John Grieves Formerly Senior Partner, Freshfields

Gordon Hamilton Formerly Partner, Deloitte & Touche LLP

Robert Hildyard QC Barrister

Stephen Hodge Deputy Chairman of the Franchise Board & Chairman of the Audit Committee, Lloyds of London. Chairman, Shell Pensions Trust

Alun Jones Formerly Partner, PricewaterhouseCoopers LLP

Mary Keegan Managing Director, Government Financial Management, HM Treasury – from 01 March 2007

David Lindsell Partner, Ernst & Young LLP - from 01 March 2007

Nigel Macdonald Formerly Partner, Ernst & Young LLP – to 31 December 2006

David Mallett Vice Chairman of the Guernsey Financial Services Commission – to 31 December 2006

Desmond McCann Formerly Risk & Quality Partner, PricewaterhouseCoopers LLP

Barbara Moorhouse Director General of Finance at Department of Constitutional Affairs

Chris Moulder Partner KPMG LLP - from 01 March 2007

Richard Murley Managing Director, NM Rothschild & Sons

Richard Pinckard Partner KPMG LLP, Consumer and Industrial Markets business unit – from 01 March 2007

Brian Pomeroy Management Consultant, formerly Senior Partner, Deloitte Consulting

Andrew Popham Partner, PricewaterhouseCoopers LLP – to 28 February 2007

John Reizenstein Chief Financial Officer, Co-operative Financial Services Limited

George Rose Finance Director, BAE Systems plc

Rosemary Thorne Group Finance Director, Ladbrokes plc – to 31 October 2006

Colin Walklin Chief Financial Officer, Barclaycard

Tony Wedgwood Formerly Partner, KPMG LLP – to 31 March 2007

Secretary

Carol Page Director, Panel Operations

ACCOUNTANCY INVESTIGATION AND DISCIPLINE BOARD

Chair

Mike Fogden CB Deputy Chairman Civil Service Appeal Board, formerly Chairman, National Blood Transfusion Service

Members

Sarah Brown OBE Reporting Member of the Competition Commission

Chris Lainé Formerly President of ICAEW & formerly Chairman Allied Textile Companies plc

Elizabeth Llewellyn-Smith CB Formerly Department of Trade and Industry and Office of Fair Trading, then Principal of St Hilda's College, Oxford

Stuart McKee Corporate Finance Partner, PricewaterhouseCoopers LLP

James Miller Member of the ICAS

Laurance Shurman Formerly Managing Partner, Kingsley Napley and Banking Ombudsman

David Thomas Corporate Director and Principal Ombudsman of the Financial Ombudsman Service

Executive Counsel

Cameron Scott

Secretary

Anne McArthur To 31 May 2006

Anna Colban From 1 November 2006

COMMITTEE ON CORPORATE GOVERNANCE

Chair

Sir Christopher Hogg

Members

Charles Allen-Jones

John Alty

Sir Victor Blank

Paul Boyle

Tim Breedon

Colin Perry

The Hon Barbara Thomas Judge

Graham Ward CBE

Secretary

Chris Hodge

ACCOUNTING STANDARDS BOARD COMMITTEES

URGENT ISSUES TASK FORCE

Chair (Non-voting)

Ian Mackintosh
Chair, ASB

Technical Director

Hans Nailor
Project Director, ASB

Members

Kathryn Cearns
Consultant Accountant, Herbert Smith LLP - from 23 November 2006
Peter Chidgey
Partner, BDO Stoy Hayward LLP
Matthew Curtis
Director, Ernst & Young LLP
Una Curtis
Professional Standards Director, KPMG, Dublin
Howard Evans
Finance Director, Misys plc
Rona Fairhead
Chief Financial Officer, Pearson plc – to 31 August 2006
Bill Hicks
Director, External Financial Reporting, AstraZeneca plc – from 14 September 2006
Peter Holgate
Senior Accounting Technical Partner, PricewaterhouseCoopers LLP
Guy Jubb
Investment Director, Head of Corporate Governance, Standard Life Investments
Marion MacBryde
Director, Makinson Cowell Ltd
John McDonnell
Partner, PricewaterhouseCoopers, Dublin
Geoffrey Mitchell
Mizhuo International plc
Christopher Nunn
Formerly Professional Standards Partner, Andersen
Brian Shearer
Technical Partner, Grant Thornton UK LLP
Andy Simmonds
Technical Partner, Deloitte & Touche LLP
Andrew Vials
Partner, KPMG LLP

Observers

David Tyrall
Accountancy Advisor, DTI – from 30 October 2006

Secretary

David Loweth
Technical Director, ASB

THE COMMITTEE ON ACCOUNTING FOR SMALLER ENTITIES

Chair

Isobel Sharp
Partner, Deloitte & Touche LLP – to 18 January 2007
Ian Mackintosh
Chairman, Accounting Standards Board – from 18 January 2007

Members

Claire Adams
Finance Director, Millivres Prowler Ltd
John Coombs
Managing Partner, Simpkins Edwards LLP
Paul Flanagan
Head of Risk, Euler Trade Indemnity plc
Sara Harvey
Partner, Hines Harvey Wood
Melvyn Howell
Formerly Senior Manager, Midland Bank plc – to 31 August 2006
Kenneth McDowell
Partner, Chiene & Tait
Liam McQuaid
Partner, Duignan Carthy O'Neill
Professor Mike Page
Professor of Accounting, University of Portsmouth – from 29 June 2006
Dr Richard Roberts
Head of SME Research, Barclays plc

Observer

Valerie Carpenter
Company Law and Investigations Directorate, Department of Trade and Industry

Secretary

Alan O'Connor
Project Director, ASB

THE FINANCIAL SECTOR AND OTHER SPECIAL INDUSTRIES COMMITTEE

Chair

Ian Mackintosh
Chairman, ASB – to 18 January 2007
David Loweth
Technical Director, ASB – from 18 January 2007

Members

David Cairns
Visiting Professor, London School of Economics and formerly Secretary General of the IASC
Deborah Chesworth
Manager, Prudential Standards Division Financial Services Authority
Julian Hance
Formerly Group Finance Director, Royal & SunAlliance Insurance Group plc
Rajan Kapoor
Group Chief Accountant, Royal Bank of Scotland
James MacLeod
Chairman, Martin Currie High Income Trust plc and Collective Assets Trust plc
Lynn Pearcy
Partner, KPMG LLP
Derek Stevens
Formerly Chief Financial Officer, British Airways plc – to 30 June 2006
Ben Higgin
Company Law and Investigations Directorate, DTI – to 27 October 2006
David Tyrall
Accountancy Advisor, DTI

Secretary

Simon Peerless
Project Director, ASB

COMMITTEE ON ACCOUNTING FOR PUBLIC-BENEFIT ENTITIES

Chair

Andrew Lennard
Director of Research, ASB

Members

Richard Bray
Financial Accountant, Cancer Research UK
Andrew Baigent
Director, National Audit Office – from 1 March 2007
Ian Carruthers
Policy and Technical Director, CIPFA – from 29 June 2006
David Creed
Chairman, The Housing Finance Corporation Limited
Martin Daynes
Director, National Audit Office
Pesh R Framjee
Partner and Head of Non Profits, Deloitte & Touche LLP
Virginia Grace
Resources Director, Parchment Housing Group
Ieuan Griffiths
Director of Finance, Driver & Vehicle Licensing Agency
Michael Hathorn
Partner, Moore Stephens
Lynn Hine
Director, PricewaterhouseCooper LLP
Richard Laughlin
Professor of Accounting, King's College London
Pam Nelson
Director of Finance, London Metropolitan University – to 19 February 2007
John Stanford
Assistant Director Technical & International, Chartered Institute of Public Finance and Accountancy
Steve Warren
District Auditor, Audit Commission

Observers

Raymond Jones
Head of Accounting Policy, Charity Commission for England and Wales
David Watkins
Head of Financial Reporting Policy Team, HM Treasury

Secretary

Alan O'Connor
Project Director, ASB

PENSIONS ADVISORY PANEL

Chair

Andrew Lennard
Director of Research, ASB

Members

John Ashcroft
Head of Strategy, The Pensions Regulator
Nigel Bankhead
Director, Board of Actuarial Standards
Nigel Biggs
Head of UK Pensions, Unilever UK
David Blackwood
Group Treasurer, ICI plc
Clive Bouch
Partner, Deloitte & Touche LLP
Paul Boyle
Chief Executive, FRC
Bob Bridges
Managing Director, Capital Cranfield Pension Trustees Limited
Roger Cobley
Chairman, Stamford Associates Ltd
Stephen Cooper
UBS Limited
Sarah Deans
Vice President, Accounting & Valuation J P Morgan
Andrew Evans
Partner, PricewaterhouseCooper LLP
Robert Hails
Watson Wyatt Limited
Gary Hibbard
British Petroleum Co plc
Nicki Mortimer
Director, Group Pensions, Astrazeneca plc
Lynn Pearcy
Partner, KPMG LLP
Derek Scott
Vice Chairman, NAPF Investment Council
John Smith
Chief Operating Officer & CEO, BBC Worldwide
Michael Starkie
Group Vice President & Chief Accounting Officer, British Petroleum plc
Jeremy Stone
N M Rothschild & Sons Limited

EUROPEAN PENSIONS WORKING GROUP

Chair

Andrew Lennard (UK)
Director of Research, ASB

Members

Luis Bautista Jiménez (Spain)
DG of Insurance and Pension Funds
Guus van Eimeran (Netherlands)
Partner, KPMG Audit
Finn Kinserdal (Norway)
Partner, Ernst & Young
Laima Kazlauskeine (Lithuania)
Director, Accounting Institute of Lithuania
Christoph Krischanitz (Austria)
Arithmetica
Prof Dr Raimund Rhiel (Germany)
Chief Actuary, Mercer Human Resource Consulting GmbH
Philip Staines (France)
Rapporteur, Conseil National de la Comptabilité
Ugo Marinelli (Italy)
Consultant and University Professor, Organismo Italiano di Contabilità

AUDITING PRACTICES BOARD COMMITTEES

SME AUDIT SUB-COMMITTEE

Chair

Richard Fleck
Chair, APB

Members

Malcolm Bacchus
Executive Director, Pathfinder Developer EIS companies
John Brace
Managing Partner, Harwood Hutton
Jayne Clifford
Partner, Martin Aitken & Co
Alan Donaldson
Partner, Scott-Moncrieff
Alan Farrelly
Managing Partner, Farrelly Dawe White
David Finch
Director, David Finch Limited
Jane Grant
Partner, Winningtons
Jon Grant
Executive Director, APB
Robert Holland
Partner, James Cowper
Peter Hollis
Hollis & Co
James Hunt
Partner, Chantrey Vellacott DFK, Belfast
Martin Longmore
Partner, Monahans
Craig Jenkins
Managing Director, Total Solutions UK Limited
Neil Marriott
Professor of Accounting and Finance, Glamorgan University
Valerie Steward
Director, PCP Limited
Martin Ward
Partner, Dodd & Co

Secretary

Hazel O'Sullivan
Project Director, APB

INVESTMENT CIRCULARS SUB-COMMITTEE

Chair

Tom Troubridge
Head of London Capital Markets Group, PricewaterhouseCoopers LLP and member of APB

Members

Kevin Desmond
Director, PricewaterhouseCoopers LLP
Laura Gallagher
Partner, KPMG (Dublin)
Stephen Hextall
Director, Ernst & Young LLP
Dudley Hilton
Director, Deloitte & Touche LLP
Peter Hughes
Partner, KPMG LLP
Malcolm Lombers
Partner, Corporate, Herbert Smith
Susan Nyman
Director, Grant Thornton LLP
Lee Piller
Technical Specialist Accounting Issues - Markets Policy, FSA
Graham Pimlott
Member of APB
Jeff Ward
Director of Vantis Corporate Finance Limited

Secretary

Steven Leonard
Project Director, APB

PUBLIC SECTOR SUB-COMMITTEE

Chair

Lew Hughes CB
Formerly Assistant Auditor General, UK National Audit Office, member of APB

Members

Jon Grant
Executive Director, APB
Caroline Al-Beyerty
Head of Audit Practice, Audit Commission
Robert Alexander
Director of Finance & Investment, South East Cost Strategic Health Authority
John Buckley
Office of the Comptroller and Auditor General, Republic of Ireland
Kieran Donnelly
Assistant Auditor General, Northern Ireland Audit Office
Tim Drew
Partner, PKF (UK) LLP
Simon Edge
Compliance Partner, Wales Audit Office
Janet Eilbeck
Head of Public Sector Audit, PricewaterhouseCoopers LLP
Russell Frith
Director of Audit Strategy, Audit Scotland
Rita Greenwood
Executive Director, Finance and Planning, London Borough of Havering
Nigel Johnson
Partner, Deloitte & Touche LLP
David Richards
Formerly Principal Finance Officer, National Assembly for Wales
Martin Sinclair
Assistant Auditor General, National Audit Office

Secretary

David Aldous
Audit Commission

OTHER FRC COMMITTEES

FRC STANDING ADVISORY GROUP ON PROACTIVITY

Chair

Bill Knight
Chair, FRRP

Members

Richard Brumby
Director, UK Charitable funds and Corporate Governance, Credit Suisse Asset Management Limited
Sally Dewar
Director of Markets, Financial Services Authority
Alistair Ross Goobey
Hermes Pensions Management Ltd
Richard Greenhalgh
Formerly Chairman Unilever UK
Michael Izza
Chief Operating Officer, Institute of Chartered Accountants in England and Wales
Huw W. Jones
Director of Corporate Finance, M&G Investment Management Limited
David Knox
Managing Director, Cazenove & Co Ltd
Lynn Pearcy
Technical Partner, KPMG LLP
Vicky Price
Department of Trade and Industry
Dr Andrew Sentance
Monetary Policy Committee, Bank of England

Annex C – Organisational structure

Organisational Chart

This diagram illustrates the structure of the Financial Reporting Council (FRC).

At the top is FRC Ltd Board, which oversees Council and Executive.

Reporting to FRC Ltd Board are several boards: - Accounting Standards Board - Auditing Practices Board - Board for Actuarial Standards - Professional Oversight Board - Financial Reporting Review Panel - Accountancy Investigation and Discipline Board

The Accounting Standards Board has a sub-committee: Urgent Issues Task Force.

The Council oversees the Committee on Corporate Governance.

The Executive is shown as a horizontal bar at the bottom, connecting to all other boards and committees.

Annex D - Financial Management and Reporting Framework

Our Financial Management and Reporting Framework, set out in our Regulatory Strategy, provides the framework within which we manage and report on the costs of our activities and how they are funded.

Accounting, auditing and corporate governance

The Framework identifies four categories of cost in relation to our responsibilities for accounting, auditing and corporate governance:

Core operating activities - Accounting, auditing and corporate governance

  • Core operating activities (accounting, auditing and corporate governance) cover all our activities in relation to accounting, auditing and corporate governance other than audit inspection, disciplinary case and Review Panel case costs.
  • The costs of the core operating activities are measured in accordance with applicable accounting standards but the amount of funds raised is adjusted for significant non-cash items, principally depreciation and capital expenditure.
  • The funds are provided in equal proportions by the FRC's three sponsors: the accountancy profession (the six major professional bodies); the business community (primarily listed UK companies); and the Government. This is the “tri-partite funding arrangement".
  • Our intention is to raise in each financial year the funds expected to be required for that ye ar.

Audit inspection costs

  • Audit inspection costs include only the specific and variable costs of the AIU. The AIU's fixed overheads (principally office accommodation and shared IT systems) are included in core operating costs.
  • Audit inspection costs are met by the individual Recognised Supervisory boards with which the firms that are subject to inspection are registered.
  • Our intention is to raise in each financial year the costs incurred in that year.

Accountancy disciplinary case costs

  • Accountancy disciplinary case costs include only the specific and variable costs of cases taken by the AIDB. The other costs of the AIDB (principally staff, accommodation, shared IT systems and other overheads) are included in core operating costs.
  • Case costs are potentially volatile from year to year, depending on the number and complexity of cases and, therefore, cannot be subject to firm budgetary limits.
  • Case costs are met by the individual participating bodies to which the members or firms that are the subject of each case belong. In the event of disciplinary complaints being brought, the disciplinary tribunals have powers to award costs against those found guilty of misconduct.
  • Our intention is to raise in each financial year the costs incurred in that year.

Review Panel case costs

  • Review Panel case costs include only the specific and variable costs of cases which the FRRP decides to take to Court or prepares to take to Court. The other costs of the FRRP (principally the staff, office accommodation and shared IT systems) are included in core operating costs.
  • Case costs are potentially volatile from year to year, depending on the number and complexity of cases and, therefore, cannot be subject to firm budgetary limits. These costs are met in the first instance from the Review Panel case costs fund, which is then replenished in the following financial year under the tri-partite funding arrangement.

Actuarial standards and regulation

The Framework identifies three categories of cost in relation to our responsibilities for actuarial standards and regulation.

With the agreement of HM Treasury, these costs are met from an annual contribution from the Actuarial Profession (10% of total costs) and a levy on insurance companies (45%) and pension funds (45%) - the actuarial funding arrangements.

Core operating costs - Actuarial standards and regulation

  • Core operating activities (Actuarial standards and regulation) cover all of our activities in relation to actuarial standards and regulation other than disciplinary case costs. They include a proportion of our overheads.
  • The costs of the core operating activities are measured in accordance with applicable accounting standards but the amount of funds raised is adjusted for significant non-cash items, principally depreciation and capital expenditure.
  • Our intention is to raise in each financial year the funds expected to be required for that year.

Actuarial disciplinary case costs

  • Actuarial disciplinary case costs include only the specific and variable costs of actuarial cases taken by the AIDB. The other costs of the AIDB (principally staff, accommodation, shared IT systems and other overheads) are included in the two categories of core operating costs in proportion to the relative costs of accountancy and actuarial cases.
  • Case costs are potentially volatile from year to year, depending on the number and complexity of cases and, therefore, cannot be subject to firm budgetary limits. We have decided to establish a fund to cover these costs.
  • The level of the fund will be kept under review in the light of experience of the number and size of cases.
  • The contribution that will be required to maintain the fund at an appropriate level will be reviewed each year. If in one year case costs exceed the annual contribution, the additional cost will be recovered in the following year from insurance companies, pension funds and the actuarial profession in the same proportion as their contributions to the FRC's other costs in relation to the new arrangements.
  • Any fine income received or legal costs awarded to the FRC in relation to disciplinary cases will be used to replenish the fund. Should the fund exceed the target level, the excess will be used to meet the FRC's actuarial operating costs, thereby reducing the costs to the funding groups.

Recovery of set-up costs

We incurred set-up costs arising from the need to establish the new arrangements. These costs were approximately £345,000, and we intend to recover them over the first three years of the operation of the new arrangements.

Measuring our effectiveness in managing costs

While we endeavour to ensure that we secure value for money in all our expenditure, the Directors believe that the cost of our core operating activities is the best indicator of our effectiveness in managing our costs.

Reserves

The Directors believe that it is prudent for the FRC to maintain reserves to meet unforeseen expenditure and in recognition of the fact that the FRC has entered into a number of long-term financial commitments.

In relation to our responsibilities for accounting, auditing and corporate governance, the level of reserves in recent years has been between £0.5m and £1.0m but is kept under review by the Directors. The Directors have undertaken to consult on any proposal to vary the level of reserves in the context of the annual Plan & Budget.

A separate reserve will be held in relation to our responsibilities for actuarial standards and regulation, built up from the actuarial funding arrangements. The Directors will keep the level of actuarial reserves under review and will consult on them each year in the context of the annual Plan & Budget.

Annex E - Abbreviations

  • ACCA - Association of Chartered Certified Accountants
  • AIDB - Accountancy Investigation and Discipline Board
  • AIU - Audit Inspection Unit
  • APB - Auditing Practices Board
  • ASB - Accounting Standards Board
  • BAS - Board for Actuarial Standards
  • CCAB - Consultative Committee of Accountancy Bodies
  • CESR - Committee of European Securities Regulators
  • CGU - Corporate Governance Unit
  • DTI - Department of Trade and Industry
  • DWP - Department for Work and Pensions
  • EECS - European Enforcers Co-ordination Sessions
  • EFRAG - European Financial Reporting Advisory Group
  • EGAOB - European Group of Auditors' Oversight Bodies
  • FASB - Financial Accounting Standards Board
  • FRC - Financial Reporting Council
  • FRRP - Financial Reporting Review Panel
  • FRS - Financial Reporting Standard
  • FRSSE - Financial Reporting Standard for Smaller Entities
  • FSA - Financial Services Authority
  • HMT - Her Majesty's Treasury
  • IAASB - International Auditing and Assurance Standards Board
  • IAS - International Accounting Standard
  • IASB - International Accounting Standards Board
  • ICAEW - Institute of Chartered Accountants in England and Wales
  • ICAI - Institute of Chartered Accountants in Ireland
  • ICAS - Institute of Chartered Accountants of Scotland
  • IEASB - International Ethics Standards Board for Accountants
  • IFRS - International Financial Reporting Standard
  • IFRIC - International Financial Reporting Interpretations Committee
  • IFIAR - International Forum of Independent Audit Regulators
  • ISA - International Standard on Auditing
  • LSE - London Stock Exchange
  • OFR - Operating and Financial Review
  • PCAOB - Public Company Accounting Oversight Board
  • POB - Professional Oversight Board
  • SEC - Securities and Exchange Commission
  • SIR - Statement of Investment Circular Reporting Standard
  • SME - Small and Medium sized Enterprises
  • SSAP - Statement of Standard Accounting Practice
  • UITF - Urgent Issues Task Force
  • UK GAAP - UK Generally Accepted Accounting Practices

Annex F - Contact Details

Questions about the Annual Report should be sent to:

Enquiries Financial Reporting Council 5th Floor, Aldwych House 71-91 Aldwych London WC2B 4HN

e-mail: [email protected]

Telephone: 020 7492 2300 Fax: 020 7492 2301

For general information about the work of the FRC, please see our website at: www.frc.org.uk.

For any further enquiries, please contact us at the above address.

© The Financial Reporting Council Limited ISBN: 978-1-84140-947-4 SAP code: UP/FRC B17004

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Name Annual Report 2006/07
Publication date 27 September 2023
Type Annual report
Format PDF, 433.0 KB
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