Company accounting watchdog to target banks
FRRP says it will look closely at banks at a time when sub-prime derivative accounting is under special scrutiny
In the wake of Northern Rock and accounting issues
over sub-prime, the
Financial
Reporting Review Panel is set to run the rule over accounting at UK banks –
but also stressed it would look at smaller banks rather than the titans of
British banking.
The Panel, part of the Financial Reporting Council, is also set to review
sectors of retail, travel and leisure, commercial property and house builders,
in the year ahead.
The scrutiny of banks will add further pressure to accountants working in the
area, who are already finding themselves under pressure to account for
derivatives related to sub-prime loans. The market for the derivatives has
collapsed making valuation difficult if not impossible.
But the FRRP chairman Bill Knight also offered reassurance to the UK’s
biggest companies, saying that ‘compliance is good at the top end of the listed
market.’
The sectors were chosen in accordance with the Financial Reporting Review
Panel’s risk-based assessment, following discussions with the
Financial Services Authority. The
Financial Reporting Council’s Standing Advisory Group, an independent committee
which comments on the Panel’s proposals, was also consulted.
The Panel is set to pay particular attention to disclosures relating to
financing arrangements and risks and uncertainties in the light of credit market
conditions at the time of approval of financial statements.
Accounts will continue to be selected from the full range of companies within
the Panel’s remit, including the largest companies, but there will be a shift in
emphasis away from the FTSE 350 to the lower end of the listed market, AIM and
large private companies. Accounts will continue to be selected for review on the
basis of company specific factors and complaints.
Announcing the proposal, Bill Knight, Chairman of the Panel said: ‘The
priority sectors are the areas in the economy that are currently under strain.
We are shifting the emphasis away from the FTSE 350 towards the mid-tier
companies where risk is seen to be greater. Recent Panel reviews have shown that
compliance is good at the top end of the listed market.’
Further reading:
FRRP to consider directors’ reports
Companies ‘should notify FRRP immediately
after qualification’
Resources & Whitepapers
Accounting Software The power of customisation in accounting systems
PwC slammed for Northern Rock non-audit work