News July 2016 Financial Reporting Council publishes Annual Report for 2015/16

Financial Reporting Council publishes Annual Report for 2015/16

21 July 2016

PN 42/16

The Financial Reporting Council’s (FRC) Annual Report for 2015/16 (PDF) outlines its financial position, achievements, and challenges last year. It also details the current 2016/19 strategy in accordance with new corporate governance principles, it also covers risk the FRC’s risk and future viability.

Financially in 2015/16, the FRC operated within its budget and raised the necessary funds through its levies. It consulted on funding arrangements to support its new audit responsibilities.

During the next strategic period, the FRC will focus strongly on making a success of its new role as the competent authority for audit in the UK.  It will, among its work on many key areas, continue promoting the importance of audit quality, corporate culture and Clear & Concise reporting.

The FRC acknowledge that having strengthened the regulatory landscape over the past three years, there is still a way to go in securing further improvements. Boards have made progress in embedding Strategic Report requirements, however, more work is needed to ensure that these disclosures clearly and concisely reflect the company’s position, performance and prospects.

Sir Winfried Bischoff, Chairman of the FRC, said,

Our Strategic Report explains the actions we have taken to strengthen the regulatory framework in response to the financial crisis. We wish to give boards, auditors and the professions - and investors - the opportunity to absorb and respond to those initiatives before we make any further significant changes to our codes and standards. Under our new three year strategy, for 2016-19, we will continue our work to drive up standards, through our regulatory powers, but also through the work of our Financial Reporting Lab and other non-regulatory initiatives.  

I have taken a personal interest in our ‘culture coalition’ project. In my experience, embedding a healthy corporate culture, with a focus on respect and good behaviour, is vital to the success of any business and creates an environment on which investors can depend. We have brought together a number of organisations to gather insight into corporate culture and the role of boards, to understand how boards can shape, embed and assess culture, and to identify and promote good practice. 

2016 sees a step change in the FRC’s responsibilities. New rules on audit regulation across the EU took effect on 17 June 2016.  The FRC has been designated as the UK Competent Authority under the Audit Regulation and Directive. Our clear aim is that by the end of the strategy period at least ninety percent of FTSE 350 audits will require no more than limited improvements as assessed by our monitoring programme.” 

In 2016/17 the FRC will undertake the following actions:
  • Make the best use of our role as Competent Authority for Audit regulation to drive further improvements in audit quality and strengthen investor confidence.
  • Promote the importance of establishing a company specific corporate culture to support long-term sustainable growth.
  • Encourage better reporting against the Stewardship Code by assessing the quality of signatory statements.
  • Assess the quality of viability reporting in the light of the 2014 UK Corporate Governance Code.
  • Continue to promote Clear & Concise reporting, including through the project to help smaller listed and AIM companies with the quality of their reporting.
  • Enhance confidence in actuarial work by implementing a new Technical Actuarial Standards framework.
Notes to editors:
  1. The FRC is responsible for promoting high quality corporate governance and reporting to foster investment.  We are the UK competent authority for audit and 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 enforcement arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.