FRC announces 2018/19 thematic reviews to stimulate improvement in corporate reporting and auditing
17 November 2017
The Financial Reporting Council (FRC) will, in 2018/19, supplement its routine monitoring programme with a series of thematic reviews of certain aspects of corporate reports and audits where there is particular shareholder interest, and scope for improvement and learning from good practice.
The topics are:
- Targeted aspects of smaller listed and AIM quoted company reports and accounts;
- The effect of the new International Financial Reporting Standards (IFRSs) on revenue and financial instruments on companies’ 2018 interim accounts;
- The expected effect of the new IFRS for lease accounting; and
- The effects of Brexit on companies’ disclosure of principal risks and uncertainties.
The FRC aims to write to 40 smaller listed and AIM quoted companies prior to their year-end, informing them that it will review two specific aspects of their next published reports and accounts. The specific aspects will be drawn from five areas that have recently featured in FRC thematic reviews or Financial Reporting Lab reports, where the FRC has published examples of what better quality disclosures might look like and which we believe will help companies meet our expectations.
The FRC will also monitor disclosures in December 2017 reports and accounts relating to the future impact of the implementation of the new IFRS on lease accounting. It will also conduct a focused review of the detail reported in June 2018 interim reports of a number of companies in industries where the new IFRSs on revenue and financial instruments are expected to have the most material impact.
The topics are:
- Transparency Reporting: A comparative analysis of transparency reports of firms with public interest entity (PIE) audits.
- Audit Quality Indicators (AQIs): An assessment of the development and use of AQIs by UK audit firms, which will draw heavily on international best practice.
The FRC will also complete its review of “The Auditors Work on the Front Half of the Annual Report”
. This review, which was included in the 2017/18 thematic inspection programme, is being undertaken over an extended period, to enable the impact of recent relevant changes to auditing standards to be fully assessed.
Priority Sectors and Areas of Focus
Priority sectors and areas of focus are a key input to the FRC’s routine monitoring programme. The corporate reports and audits selected for review in 2018/19 will have regard to the following priority sectors:
- Financial Services, with particular emphasis on banks, other lenders and insurers;
- Oil and Gas;
- General Retailers; and
- Business Support Services.
Particular attention will also be paid to first and last year audits, the audit of fair value investments, including goodwill impairment; the nature and extent of the use of auditor’s experts and specialists, and the approach to the audit of controls.
The work of the group auditor will continue to be a mandatory area of review, with a particular focus on the additional requirements in respect of the work of component auditors.
Notes to editors:
1. The Financial Reporting Council’s (FRC) mission is to promote transparency and integrity in business. The FRC sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. As the competent authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality.
2. You can find further information here on the FRC’s approach to the reviews of smaller listed and AIM quoted company reports (PDF) and the new IFRSs on revenue and financial instruments (PDF)