UK plc should brace itself for yet more changes to corporate governance following the FRC's announcement that rules on the assessment of internal controls will be radically overhauled.
Sir Bryan Nicholson, head of the revamped Financial Reporting Council, told a City audience on Monday that he would establish a committee to review the report by Nigel Turnbull.
The review is widely expected to result in a new obligation for auditors to examine a company’s internal controls and risk management. Such a move would represent a fundamental shift for UK auditors and bring them into line with the Sarbanes-Oxley Act.
The Turnbull report, published at the end of 1999 and still widely respected, is now deemed to be out-of-date due to recent far-reaching changes to management responsibilities in the UK, Europe and the US.
Peter Wyman, former ICAEW president and partner at PricewaterhouseCoopers, said: ‘ The UK simply cannot get left behind on such an important issue as internal controls. It’s quite a radical next step.’
Any changes are likely to result in a mixed reaction from business, particularly among smaller listed companies. But for others, namely those with a US listing, the amendments are not expected to cause significant volumes of extra work.
ICAEW president David Illingworth welcomed the initiative – but said the UK did not need ‘a knee-jerk reaction’.