The first consultation phase of the review into Turnbull’s guidance on internal control has just concluded. Here are some of the views over what direction any revised recommendations should follow.
‘Turnbull’s principles-based approach has been more successful than the prescriptive line we have seen from the US via Sarbanes-Oxley,’ said ACCA chief executive Allen Blewitt.
‘We believe that the FRC review must retain a broad spectrum of internal controls, as opposed to Sarbox’s sole focus on matters which affect external financial reporting. But boards must not become too risk-averse ? risk management should be about seizing opportunities presented by the unexpected, as well as managing the downside.’
Blewitt added that market pressure will deliver more meaningful disclosures on internal controls than the suggested assertions of effectiveness, with the soon-to-be-introduced operating and financial review suggested as the ideal place for such disclosure.
Charles Tilley, chief executive at CIMA, said that ‘the current approach of a high-level principles and risk-based approach is the correct one’ and that the report ‘should cover all controls, not just the financial ones’, but that there were several ‘practical issues’ surrounding public reporting of the controls.
Sir Hugh Collum, chairman of the Institute’s corporate governance committee, argued that should the board’s private assessment be made public; ‘there would inevitably be calls for this to be audited, leading to substantial additional costs’. It could also undermine the trust that underpins the capital market system, he said.
Sir Hugh thought that the current Turnbull guidance’s principles-based approach had been largely successful, leading to more meaningful and thorough consideration of risk at the board level.
He said the ICAEW would also resist any move to limit the scope of focus to just financial controls as this ‘would not take into account the full diversity of risks companies face’.
A submission from the Association of British Insurers said that ‘we would not support the indiscriminate import of overseas requirements’. It raised particular objection to any move towards a Sarbanes-Oxley style framework. It was, however, more receptive to the idea of public statements on effectiveness of controls.
While it understood reservations on the subject, it believed that ‘the opportunity for engagement with shareholders – which should follow from discursive discussion of risks and how they are managed – should itself contribute to good management of risk and improved confidence’.
Two new audit partners have been appointed at the firm BDO in its audit practice following continued growth and investment
Investment in people, tech and businesses impacts on EY's profit per partner figure
If businesses do not take cyber security seriously in their business planning regulators may do it for them, the ICAEW has warned
Dr Richard Willis provides a several thousand-year history lesson of the profession, from origin to modern-day