The Financial Reporting Council is rarely out of the headlines these days… And it is now looking at broadening the scope of company audits to provide a bigger picture of a company with a “front to back” audit of its accounts and annual report. This, it believes, would appeal to shareholders and enhance their ever-dwindling faith in the audit process.
Stephen Haddrill, chief executive of the FRC, takes up the story in the Financial Times. “Where the directors talk about matters of governance or some aspects of risk, we don’t have a full audit process and I think that ought to be addressed. [Auditors should] have to check everything within the covers [of an annual report], more or less,” Mr Haddrill says.
“There are a lot of numbers in the annual report that do not adhere to accounting standards. This data can be very useful to investors, but it’s not audited and it’s not done to a consistent standard. So should that be audited in future? I think there is a case for that, because investors rely on it.”
Called into question
After the likes of Carillion, the whole audit process and the credibility of what companies say about their prospects has been called into question. The FRC has been accused of going soft on the Big Four Accounting firms. Maybe this is a sign that the watchdog is sharpening its teeth.
The FRC also finds itself in the headlines on Accountancy Daily, but for different reasons. The Local Authority Pension Fund Forum called for the FRC to be disbanded following a consultation about the watchdog. It said the group had avoided its obligations as a public body. “LAPFF considers that the positions of the FRC chair and the chief executive are untenable and considers that the FRC should be put into special measures, to be run by commissioners until a new body is set up under primary legislation.”
But the FRC has hit back at what it calls inaccuracies. “It is correct that the FRC has been classified as a public body since 2004 but it is incorrect to say that the FRC ‘has avoided the obligations that stem from this status’.”
“The FRC has been part of the whole of government accounts and has provided detailed financial information to and maintained a close working relationship with its sponsoring department, has participated in various government initiatives and has reported to the Secretary of State and Parliament each year on its activities.”
