In the wake of Northern Rock and accounting issues over sub-prime, the Financial Reporting Review Panel is set to run the rule over accounting at UK banks - but also stressed it would look at smaller banks rather than the titans of British banking.

The Panel, part of the Financial Reporting Council, is also set to review sectors of retail, travel and leisure, commercial property and house builders, in the year ahead.

The scrutiny of banks will add further pressure to accountants working in the area, who are already finding themselves under pressure to account for derivatives related to sub-prime loans. The market for the derivatives has collapsed making valuation difficult if not impossible.

But the FRRP chairman Bill Knight also offered reassurance to the UK's biggest companies, saying that 'compliance is good at the top end of the listed market.'

The sectors were chosen in accordance with the Financial Reporting Review Panel's risk-based assessment, following discussions with the Financial Services Authority. The Financial Reporting Council's Standing Advisory Group, an independent committee which comments on the Panel’s proposals, was also consulted.

The Panel is set to pay particular attention to disclosures relating to financing arrangements and risks and uncertainties in the light of credit market conditions at the time of approval of financial statements.

Accounts will continue to be selected from the full range of companies within the Panel’s remit, including the largest companies, but there will be a shift in emphasis away from the FTSE 350 to the lower end of the listed market, AIM and large private companies. Accounts will continue to be selected for review on the basis of company specific factors and complaints.

Announcing the proposal, Bill Knight, Chairman of the Panel said: 'The priority sectors are the areas in the economy that are currently under strain. We are shifting the emphasis away from the FTSE 350 towards the mid-tier companies where risk is seen to be greater. Recent Panel reviews have shown that compliance is good at the top end of the listed market.'

Further reading:

FRRP to consider directors' reports

Companies 'should notify FRRP immediately after qualification'

PwC slammed for Northern Rock non-audit work