Scandal stoppers

The Financial Reporting Review Panel is calling on the investment community
to share responsibility for improving accounting in the UK by helping the panel.

The panel aims to review about 300 sets of accounts each year, selected on
the basis of risk assessment, and focused on the larger listed companies. This
is a small proportion of the total number of companies within our remit. We are
developing our risk-assessment model, but there can be no substitute for the
vigilance of those who regularly read a wide spread of accounts – investment
managers and analysts.

The panel enforces the law and accounting standards. We do not impose fines
or other penalties – our interest is in correcting accounts if they do not
comply with the law. We have the power to apply to court to have accounts
restated, but in our 15-year existence we have always solved problems by
agreement with the company concerned.

Why should the investment community help us? All complaints to the panel are
treated as confidential. Those who refer cases to us are not asked to take any
further action or to justify their complaint. The panel makes its own assessment
and starts an enquiry, or not, as it thinks fit. We do not reveal that the
enquiry was started by a complaint. We tell a complainant the outcome at the
conclusion of the enquiry.

But the main reason investors should help the panel is to improve the quality
of financial reporting. We all know the consequences of non-compliant
accounting. The panel represents the UK response to these risks. It is an
efficient operation, representing excellent value for money, and it deserves
support. Investors and analysts depend on accounts. They have a vital interest
in the system and we believe they should take a share of responsibility for
maintaining and improving it.

We are not asking for confidential information or the fruits of research. We
understand that investors may be able to clarify issues by calling the company.
But if there is something in published accounts which they believe is wrong or
do not understand, then call us or use the website.

Our work shows that the quality of financial reporting for the larger
companies we review is generally good, but if there is ever a major scandal we
do not want to be told that everybody knew – tell us first.

Bill Knight is chairman of the Financial Reporting Review Panel

Related reading

PwC office 2