Workload aside, Flint has a strong background in corporate governance, so he may be the ideal choice to head up the Financial Reporting Council’s review of the Turnbull guidance on internal control and risk management.
As a member of the group that devised the original guidance in 1998, he is well positioned to understand the reasons behind their decisions, changes that have occurred since and aspects warranting a significant update.
His experience and close relationships with regulators and standard setters will also be a massive help. The 48-year-old former KPMG partner is also a member of the UK’s Accounting Standards Board and sits on the Standards Advisory Council of the International Accounting Standards Board.
Perhaps then, it was not a great surprise to see HSBC emerge as the first European bank to declare it would use the controversial IAS39 standard on financial instruments, regardless of whether or not it was adopted by the European Union in 2005.
Flint’s standing in the regulatory community will increase the expectations on him to get this review right first time. No doubt he will want to make a big splash with his recommendations, but he will have to do so without undermining the original work that has been operating successfully for the last five years.
The terms of the review make clear that any changes must continue to meet the objectives of the original guidance. There is, however, a good degree of leeway for change, and many in accountancy – including some regulators – are expecting some fairly significant alterations in procedure.
Common perception is that the review, which kicks off later in the year, will introduce a requirement for auditors to make a judgment on a company’s internal controls, bringing it into line with requirements introduced on the other side of the Atlantic by the Sarbanes-Oxley Act.
‘The UK simply cannot get left behind on such an important issue as internal controls,’ says PricewaterhouseCoopers partner Peter Wyman. ‘It’s quite a radical next step.’
Should these predicted changes become reality, they are guaranteed a mixed reaction. Although most within the accounting world recognise the need for change, many are also worried that such moves could be a knee-jerk reaction to recent financial scandals in the US.
Any changes brought in by the review will come into force in 2006, and all these changes are within Flint’s power to decide.
But he does have a strong team of established business leaders behind him. With GlaxoSmithKline CFO John Coombe, Diageo chief executive Paul Walsh and Michael Hughes, chairman of audit at KPMG, among the 12 others participating in the review, Flint will have much-needed assistance. But he will also need to take a tough stance to coordinate this very driven group of personalities.
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