Panel ready to check 300 sets of accounts
The new-look financial reporting regulator will call in the reports and accounts of as many as 300 companies each year from this autumn, in a radical break with past practice.
Link: City watchdog to work with FRRP
Accountancy Age has learned that the highly respected Financial Reporting Review Panel will review the accounts of hundreds of listed companies every year on a risk-based approach.
The move is a totally new method, not only for the panel, but also among existing regulators. US watchdog, the Securities and Exchange Commission, instead looks at all company accounts on a three-year rotation.
The panel’s proactive move is based on a recommendation by a government body set up to examine accountancy regulation, which included an overhaul of the Financial Reporting Council led by Sir Bryan Nicholson.
The FRRP’s budget is to rise by a factor of 10 to around £3m, which will be used to recruit top-flight people to actively check that companies are complying with accounting and disclosure rules.
Ian Brindle, deputy chairman of the FRRP, told Accountancy Age: ‘We are bound to look at financial statements that measure in the hundreds. In terms of numbers, we don’t know at the moment. We will be undergoing a learning process.’
A note of caution, however, has been sounded. Derek Brownlee, executive at the Institute of Directors, believes the volume of accounts may be too unwieldy. ‘It’s a tall order. There could be a risk of taking on too much. They would have to have a clear mandate,’ he said.
A spokesman for the Confederation of British Industry said: ‘We support the idea of a targeted approach. But we wouldn’t want all companies to have to go through this every year.’
Brindle, however, was quick to point out that the panel would not always look at the company’s entire financial statements.
The panel’s new status follows the closure of the Accountancy Foundation, and the consolidation of regulatory power into the Financial Reporting Council. In its more than 10-year history, the FRRP has never gone to court to get a company to restate its accounts.