FRC formalises increased transparency of its review of company accounts
News types: Codes and Standards Announcements
Published: 7 October 2014
Read or download the Revised operating procedures for reviewing corporate reporting and Feedback Statement: Revised operating procedures for reviewing corporate reporting (PDF).
David Childs, Chairman of the FRC’s Conduct Committee said,
“These amendments to the operating procedures will provide greater transparency to investors who rely on company reports and accounts to make and justify their long term investment decisions. They will help us to meet the expectations of a regulatory environment where increased transparency is both expected and required in order to enhance trust in corporate reporting.”
Following public consultation and approval by the Department for Business, Innovation & Skills (BIS), other amendments to the procedures include:
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An explanation when a Committee Reference may be requested or a press notice issued by the FRC’s Conduct Committee in respect of an individual case.
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An expectation that, where a company voluntarily refers to its exchange of correspondence with the Conduct Committee, it will invite the Committee to comment on its proposed text in advance of publication. This is to ensure that any such reference that a company may make in its report is factually correct, fair and balanced.
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An explanation that the Conduct Committee’s letter to a company may include comments on aspects of reporting, other than compliance with mandatory requirements, to encourage improvements to the quality of its future reporting. For example, comments may be made in the context of the FRC’s objective that financial reporting is clear and concise.
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An enhanced description of how the Conduct Committee manages complaints.
The feedback statement, also published today, provides additional information about the Conduct Committee’s consideration of points raised by respondents to the consultation paper.
The revised operating procedures apply with immediate effect.
Notes to editors:
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The FRC is responsible for promoting high quality corporate governance and reporting to foster investment. We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work. We represent UK interests in international standard-setting. We also monitor and take action to promote the quality of corporate reporting and auditing. We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.
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The Conduct Committee is a body authorised under the Companies Act 2006 (‘the Act’) to review and investigate the annual accounts, strategic reports and directors’ reports of public and large private companies to see whether they comply with the requirements of the Act, including applicable accounting standards. Following implementation of the Accounting Regulation (EC) No. 1606/2002, this may mean compliance with UK or International Financial Reporting Standards.
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Where breaches of the Act are discovered the Conduct Committee seeks to take corrective action that is proportionate to the nature and effect of the defects, taking account of market and user needs. Where a company’s accounts, strategic report or directors’ report are defective in a material respect the Conduct Committee will, wherever possible, try to secure their revision by voluntary means, but if this approach fails the Conduct Committee is empowered to make an application to the court under section 456 of the Act for an order for revision. To date no court applications have been made.
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The Conduct Committee maintains a Financial Reporting Review Panel (FRRP). The Chairman is Richard Fleck and the Deputy Chairs are Joanna Osborne and Ian Wright. There are currently 21 other members drawn from a broad spectrum of commerce and the professions. Individual cases may be dealt with by a specially constituted Review Group of the FRRP.