THE FRC has revealed a “step change” in its responsibilities as the profession’s watchdog and suggested the outcome of the referendum on the UK’s membership of the EU has raised questions about the regulator’s future.
In its annual report for 2015/16, the FRC said it will focus on its new role as the competent authority for audit in the UK to improve audit quality and strengthen investor confidence.
Sir Win Bischoff, chairman of the FRC, said accounting watchdog’s aim, after being handed extended powers under the new rules on audit regulation across the EU, is that by the end of 2019 at least 90% of FTSE 350 audits will require no more than limited improvements.
The FRC added that although the UK’s decision to leave the EU has not changed its regulatory framework, it has raised questions about whether it should change in the future.
“We will consequentially pay close attention to the decision now taken by government and parliament, and continue to work in collaboration with our key stakeholders, particularly investors, business and the professionals we regulate, in order to ensure our work continues to support economic growth and the effective functioning of the capital markets,” Bischoff said.
In 2016/17 the FRC said it 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.
Bischoff added: “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.”
Related reading
PwC fined a record £5.1m by the FRC over RSM Tenon audit
PwC and partner Nicholas Boden have been severely reprimanded and fined over admitted misconduct relating to RSM Tenon audit
KPMG fined £4.8m over Miller Energy audit
KPMG issued an unqualified report of Miller Energy’s financial statements, despite the fact that the company grossly overstated the value of certain assets, and counted some twice
Toshiba narrowly escapes delisting as PwC finally signs off on accounts
PwC has signed off on Toshiba’s accounts, ending a period of uncertainty during which the auditor withheld its opinion on the tech giant’s financial statements
Brave new world: how auditor responsibilities are changing
Fayez Choudhury, CEO of IFAC, looks at the updated Code of Ethics for Professional Accountants, NOCLAR, and how auditor responsibilities are changing
