FRC consults on revised operating procedures for reviewing corporate reporting
News types: Consultation Announcement
Published: 14 April 2014
Where a Conduct Committee enquiry gives rise to a significant correction or improvement in a company’s report and accounts, the informal practice has been that the Conduct Committee may ask the company to refer to the exchange of correspondence in the report in which the change is made.
The revised operating procedures formally introduce the concept of the ‘Committee Reference’ and indicate the tests applied to ensure that the explanation published by the company is fair and balanced. The Conduct Committee expects to be given the opportunity to comment on any such disclosure a company intends to provide in its report and accounts in which it refers to its engagement with the Committee.
Although it is in the public domain, the Committee Reference is generally only known to those users who read the set of accounts in which it appears. A proposed amendment to the operating procedures will allow the Conduct Committee to include the names of those companies who have published Committee References in its annual CRR report.
Other amendments include:
- An explanation that the Conduct Committee’s letter to a company may include references to aspects of reporting other than compliance with mandatory reporting requirements; for example, cutting clutter;
- Recording that, where practicable, the Conduct Committee’s opening letter to the company Chairman is copied to the Finance Director and Audit Committee Chairman; and
- Providing more information about how the Conduct Committee manages complaints.
The FRC welcomes comments on the proposed disclosures by 16 June 2014. They should be addressed to: [email protected]
Notes to editors:
- 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.
- The Conduct Committee is a body authorised under the Companies Act 2006 (‘the Act’) to review and investigate the annual accounts 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.
- 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 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.
- 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 24 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.