A plea of ‘don’t let us be the last to know’ about an accounting scandal has
been made by the Financial Reporting Review Panel following the rejection of its
call for tip-offs from the City.
Writing in Accountancy Age, FRRP chairman Bill Knight asked investors who
feel there is no economic incentive to report concerns over accounts to the
panel to ‘think again’. ‘Investors and analysts depend on accounts,’ said
Knight. ‘They have a vital interest in the system and we believe they should
take a share of the responsibility for maintaining and improving it.’
While the panel proactively targets 300 accounts a year, it still relies
heavily on information from external sources. If that is not forthcoming, argues
Knight, then the chance of corporate failure increases.
‘If there is ever a major accounting scandal in this country we do not want
to be told that everybody knew – tell us first,’ he pleaded.
But the fresh call looks to have received short shrift from the investor
community, with some arguing that there were problems with the FRRP’s structure.
One investor said that the panel suffered from being ‘full of lawyers’ with
‘no users at all’. This in turn led to the potential for the FRRP to view
compliance through legal interpretations that could lead UK accounting down the
road to ‘box-ticking’ and away from a principles-based approach to standards.
Last week, investors stated that it was not their job to inform the panel
over accounting issues that may arise within the companies they owned. There was
fear that such a tip-off could trigger further investigations, which could harm
the value of their business and in turn their investments.
There was also uncertainty over what issues the panel could take forward,
with many practices undertaken by companies technically being allowed under
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