Corporate Reporting Review (overview)
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We review the annual report and accounts of public and large private companies, and certain other entities, for compliance with the law and other relevant reporting requirements. Our activities also cover the interim reports of some listed companies.
The FRC’s Corporate Reporting Review (CRR)
The FRC reviews the strategic reports, directors’ reports and annual accounts (the annual report and accounts) and interim reports of companies included on the Financial Conduct Authority’s (FCA) Official List (eg companies listed on the Main Market of the London Stock Exchange), and the annual reports and accounts of UK-incorporated public companies (including those listed on AIM) and large private companies. Our remit also extends to the members' report and accounts of Limited Liability Partnerships (LLPs).[1] The reviews assess whether the reports and accounts comply with the Companies Act 2006 (the Act) and other relevant requirements. This work is undertaken by the CRR team.
CRR’s principal activities
The directors of a company approve the annual report and accounts and are responsible for their accuracy and for the judgements, estimates and assumptions made in their preparation. The company’s auditors audit and report on the annual report and accounts. The FRC’s corporate reporting review work does not duplicate what directors or auditors do. It is the role of the FRC to enquire, through its CRR function, into cases where it appears that there is, or may be, a question whether the strategic report, directors’ report or annual accounts comply with the requirements of the Act. A similar division of responsibilities applies to a company’s interim report and to the members’ report and accounts prepared for an LLP.
To this end, the principal activities carried out by CRR are:
- developing and operating a programme of reviews of reports and accounts and interim reports, using an annually determined risk-based selection of companies that fall within its remit
- entering into constructive engagement with companies whose reports and accounts or interim reports have come to its attention, whether through selection for review or through complaints, where it has been determined that there is or may be, a question whether they comply with the Act or other relevant reporting requirements
- undertaking thematic reviews that focus on areas of corporate reporting where it is considered there is scope for improvement and which are of particular interest to stakeholders, with the aim of driving continuous improvement in quality through the identification of good examples of clear and concise disclosures
- ensuring that, subject to any legal restrictions on sharing of information, any findings in respect of the corporate reporting of a company are brought to the attention of other authorities, including other parts of the FRC, so that they can decide whether they need to take any action within the scope of their remit and powers, and
- liaising with the FCA and other authorities in the United Kingdom and internationally, as outlined in the table below, to foster the consistent application of accounting requirements and to improve the quality of compliance of financial information with reporting requirements.
When carrying out these activities, CRR may seek advice from Senior Advisors and members of the Advisory Panel (independent, non-executive subject matter specialists), or from staff from other parts of the FRC (eg lawyers and audit specialists).
The FRC does not offer advice on the application of accounting standards or the requirements of the Act. There is no system of pre-clearance for accounting treatments or other disclosures.
In carrying out its corporate reporting review work, the FRC aims to take a proportionate approach. The FRC maintains Operating Procedures for its corporate reporting review work which require that, as far as possible, any person involved in the review process seek to operate in accordance with the principles of good regulation as set out in the Regulators’ Code.
The FRC aims to ensure:
- timely but fair dealings with companies whose financial information comes under scrutiny
- respect for the confidentiality of the process and the information provided by such companies, subject to the legitimate needs and responsibilities of other authorities, and
- appropriate public reporting of its monitoring actions.
How CRR works with other bodies
| Bodies | Details |
|---|---|
|
FCA |
Regular meetings are held between the FRC and the FCA to share the outcome of our work on regulated companies and discuss ongoing matters of joint interest. All the outcomes of substantive enquiries into Main Market and AIM companies are shared with the FCA on closure. Under the Companies (Audit, Investigations and Community Enterprise) Act 2004, we also have monitoring responsibilities with respect to interim reports and annual reports of non-UK companies. We pass our findings to the FCA for further consideration and a decision on whether the use of its enforcement powers is appropriate. The FCA may refer corporate reporting matters to the FRC when it is best suited to investigate further. We continue to work closely with the FCA, in accordance with a joint supervisory strategy, on the Task Force on Climate-related Financial Disclosures (TCFD) aligned climate-related disclosure requirements for listed companies. |
|
UK Endorsement Board (UKEB) |
CRR has observer representation on both the UKEB and its Sustainability Working Group. This provides an opportunity to feed into the UKEB’s activities regarding the application of extant IFRS Accounting Standards, as well as any proposed changes to these. For any major proposed changes to IFRS Accounting Standards, CRR inputs into any outreach activities of the International Accounting Standards Board (IASB). |
|
UK Sustainability Disclosure Technical Advisory Committee (TAC) |
CRR supports the TAC’s technical assessment of sustainability reporting standards and related endorsement recommendations, by providing practical insights from our reviews of companies’ sustainability reporting. |
|
Prudential Regulation Authority (PRA) |
We meet with the PRA quarterly and liaise on matters of mutual interest regarding financial institutions. We share all our case outcomes from banking and insurance reviews, and may share further information, for example, on complaints that affect both corporate and prudential reporting. |
|
HM Revenue and Customs (HMRC) |
We discuss developments in corporate reporting with HMRC. HMRC may also refer matters within our regulatory scope to us. |
|
US Securities and Exchange Commission (SEC) |
We cooperate with the SEC in relation to entities with dual UK and US listing when, among other things, the FRC view on an IFRS matter could result in a significant change to the issuer’s financial statements. We hold ad hoc meetings with the SEC on matters of mutual interest. |
|
European Securities and Markets Authority (ESMA) |
We meet with ESMA, along with the FCA, on a biannual basis, to discuss reporting developments and matters of mutual interest. |
We also engage with other regulators and government bodies on matters related to our respective remits, where relevant.
Footnotes
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[1]
Note that, on this web page, the term “company” should be read to include all entities within the scope of our activities and that terms such as “board”, “audit committee” and “director” should be read to include the equivalent decision-making bodies and positions in overseas and non-corporate entities.