The report, which was first presented yesterday at the Audit Committee members annual seminar 2013 (link to FRC website), is centered around the three areas of Audit Committee reporting under the revised (2012) UK Corporate Governance Code: 

• Addressing significant financial statement reporting issues;
• Assessing external audit effectiveness; and
• Appointing the auditor and safeguards on non-audit services. 

The report highlights that participants in the project considered that Audit Committee reporting of significant financial statement issues “has the most scope for improvement”.  The Financial Report Lab comments: 

Investors identify a sense of urgency for ACs to describe frankly the significant issues, including the difficult judgements and what they have done to address them. 

Six key themes are highlighted for Audit Committee Chairman: 

• Demonstrate ownership and accountability by personalising your reporting;
• Be specific to your company and to the current year;
• Say what you did (not just what you do): depict the specific activities during the year and their purpose, using active, descriptive language;
• Disclose judgement calls made for the year, and the sources of assurance and other evidence drawn upon to satisfy yourselves of the appropriateness of the conclusion;
• Consider your audience in describing issues and their context, policies, processes, conclusions and their consequences for the company and its reporting; and
• Consider where in the annual report information is best included and avoid repetition.

Example disclosures are provided in the three Audit Committee reporting areas with specific observations as to what investors’ value most from those disclosures.  Whilst not definitive they do provide an indication as to what approaches to Audit Committee reporting companies are currently taking. 

The report acknowledges that "further developments in AC reporting will be influenced by the Competition Commission's final decision on remedies for the audit market" which include the proposal for a shareholders’ vote at the AGM on whether “Audit Committee Reports in company annual reports are satisfactory”.

Click for (all links to FRC website):

• Press release.
• Full report by the Financial Reporting Lab.
• Slide pack from the Audit Committee members annual seminar.
• Transcript and proceedings from the Audit Committee members annual seminar