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FRC record of Open Meeting on 4 February 2015

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16 Feb 2015

The Financial Reporting Council (FRC) has published the transcript and proceedings of the Open Meeting held on Wednesday 4 February 2015. The meeting gave stakeholders the opportunity to put questions to the FRC including commenting on the FRC priorities for 2015/16.

Sir Win Bischoff, Chairman of the FRC, provided a high level overview of the focus of the 2015/16 draft plan and budget.  He indicated that the focus of the FRC’s 2015/16 plan will be on corporate governance and investor stewardship, corporate reporting that is fair, balanced and understandable and also confidence in the value of audit.  He also indicated that there will be a continued focus on the FRC’s disciplinary and conduct work.

Stephen Haddrill, Chief Executive Officer, provided a more detailed look at the draft plan and budget for 2015/16 which was published by the FRC in December 2014.  Key highlights include:

Corporate Governance

  • the FRC will be setting up a roundtable over the coming weeks to understand best practice with regards to company culture.  Questions that will be addressed include; how does the board determine and promote the culture of the company to ensure that the company lives up to those cultural guidelines that it is setting?; How does the company make sure that it is acting in all its processes consistently with that culture?; and what does the company do when there needs to be a change in culture because it is not performing as investors expect?
  • the FRC intends to help companies implement the viability statement introduced as a result of the changes to the UK Corporate Governance Code in September 2014 and hopes to “get a good outcome when the first reports come through after the end of 2015”.
  • the FRC will continue their work on supporting better quality engagement between boards and shareholders and ensure that those that have signed up to the Stewardship Code deliver on the commitments they have given.  The FRC want “better disclosure” by asset managers to investors about “what they are actually doing, to promote adherence to the Code”.  The FRC will also work with the Department for Business, Innovation and Skills (BIS) “to influence the European Commission and others on the proposed EU Shareholder Rights Directive”. 

Corporate Reporting

  • Updates to the UK Corporate Governance Code such as the requirement for annual reports as a whole to be fair, balanced and understandable and changes to audit reports “have helped investors to see the real value in audit” and “firms have responded positively to the challenge of talking more openly with investors about the way they have gone about audits”.
  • Clear and Concise reporting initiatives including the reports prepared by the Financial Reporting Lab which “have been a great success”.  The Financial Reporting Lab will continue work in this area in 2015/16.
  • the FRC want to ensure that “people on the preparer side and on the audit side are well prepared” for the change to new UK GAAP

Auditor Reporting

  • the FRC indicate that it has seen improving audit quality over recent years and highlighted the thematic reviews into the banking sector and on loan-loss provisioning in 2014.  Although these indicated that the quality of audit work in those areas had improved the FRC believes that “there is always more that can be done”.  The FRC highlights that it will be undertaking more audit quality inspections in response to the request from the Competition and Markets Authority and also will be implementing the Audit Directive and Regulation jointly with BIS.          

Attendants were then given the opportunity to put questions to the FRC.  

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