Regulator says economic crisis threatens corporate reporting

by Gavin Hinks

More from this author

16 Dec 2008

  • Comments

The economic crisis has heightened the risks to confidence in corporate reporting and governance to such an extent that the Financial Reporting Council has changed its plans to tackle the threat.

The Financial Reporting Council believes there is increased risk to the independence of the International Accounting Standards Board and that the economic crisis has heightened the risk of directors writing 'errors', or 'making omissions' in their financial reports.

In its new plan for 2009/10 the regulator also believes the concentration of the audit market remains a risk which could result in ‘significant uncertainty and cost’ should one of the major audit firms leaves the market through calamity or through choice.

The FRC says: ‘We believe that those with responsibility for implementing high standards of corporate reporting and governance, and the FRC and other regulatory authorities should remain alert to the heightened risks and respond accordingly.’

Sir Christopher Hogg, chairman of the FRC, said: ‘The profound effects of the credit crunch are now challenging everyone to re-examine their assumptions about what works and what doesn’t.

‘The FRC in the Plan period will be giving priority to reviewing in the light of the present crisis the impact of its standards in corporate reporting and governance.’

On international standards the FRC believes there are two key worries. The independence of the standard setter and the possibility that the convergence project with the US is drawing the International Accounting Standards Board into setting rules instead by the a more rules-based approach to setting standards, rather than being principles-based.

However, the FRC has no defined course of action to tackle these concerns in its plan. It said it will continue to ‘influence the development of IFRS’.

On corporate reporting the FRC has re-emphasised its focus review the reports in the banking, retail, leisure, travel, commercial property and house building.

As for auditors the FRC said that it will assess whether its own project to tackle audit concentration has been effective and will ‘consider the need for additional action’, a statement that will concern those who believed that the audit market should be left to resolve itself.

Visitor comments

blog comments powered by Disqus
display:none

Add your comment

We won't publish your address


By submitting a comment you agree to abide by our Terms & Conditions

Your comment will be moderated before publication

Submit
  • Send

Financial Planning and Performance AnalystCabinet Office-Greater London-Competitive

 
 
 
 
 
 
 
 

 

Newsletters

Get the latest financial news sent directly to your inbox

  • Best Practice
  • Business
  • Daily Newsletter
  • Essentials

Careers

Search for jobs
Click to search our database of all the latest accountancy roles

Create a profile
Click to set up your profile and let the best recruiters find you

Jobs by email
Sign up to receive regular updates with the latest roles suitable for you

Briefings

budget-management

Why budgeting fails: One management system is not enough

If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.

cchcover

iXBRL: Taking stock. Looking forward

In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.