The FRC’s programme of corporate reporting reviews and audit quality inspections will pay particular attention to the following areas:

• Risks related to the current economic environment (for example: going concern, impairment, recoverability and recognition of tax assets/liabilities)
• Climate related risks, including Task Force on Climate-related Financial Disclosures (TCFD)
• Implementation of IFRS 17 Insurance Contracts
• Cash flow statements

In selecting corporate reports and audits for review, the FRC will give priority to construction and materials, food producers, gas, water and multi-utilities, industrial metals and mining and retail.

A press release is available on the FRC website.

In FRED 85, the FRC proposes only minor amendments to the standard for consistency with IAS 1 Presentation of Financial Statements. 

No new disclosure exemptions are proposed.  As a result, qualifying entities will be subject to new disclosure requirements in Non-current Liabilities with Covenants (Amendments to IAS 1), Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7) and Lack of Exchangeability (Amendments to IAS 21).

The FRC is requesting comments on FRED 85 by 4 March 2024.  A press release and the consultation are available on the FRC website.

Entities admitted to trading on UK regulated markets are required to produce their annual financial reports in a structured digital format (i.e. using iXBRL tagging) and submit that report to the Financial Conduct Authority (FCA) for filing in the National Storage Mechanism (NSM) under the UK implementation of the European Single Electronic Format (ESEF).  

The report is based on a review of 50 reports filed to the FCA's National Storage Mechanism and highlights the growing importance placed by investors on structured digital reports. 

The insights report focuses on three key areas: tagging, design and usability and process.  It provides some good practice tips with respect to tagging which build upon its 2021 and 2022 reports and highlights that most tagged report rejections are as a result of basic errors such as an incorrect file format, naming and structure.  

The Lab reminds companies that even if the tagging process is outsourced, they are responsible for the quality of the report.  It provides a number of areas for companies to consider when assessing the overall quality of their reports prior to submission.   

A press release and the full report are available on the FRC website.

The report, which follows the audit quality report of Tier 1 firms in July, sets out key inspection and supervision findings at Tier 2 and Tier 3 firms, alongside areas of good practice.  The report highlights that of the 13 audits inspected, only 38% required no more than limited improvements, 24% required more than limited improvements, and a further 38% required significant improvements.  Many of the findings were in routine areas such as the audit of journal entries and complying with archiving requirements.  Other significant findings were in the areas of judgement and estimates and going concern.  

In response to the findings the FRC has stated that 'Tier 2 and Tier 3 firms must prioritise audit quality improvements and respond swiftly'.  Such actions would include investing in their audit methodology, human resources and audit quality functions, learning from things that went wrong or went well, and seeking to embed a culture that recognises and prioritises audit quality.  The report highlights initiatives the FRC has undertaken to support firms in this area.

A press release and the full report are available on the FRC website.

In December 2022, the FRC published a policy paper providing an overview of its approach to competition in the audit market.  The policy paper set out the need for a market that consistently delivers high quality and is resilient.  The policy paper covered:

• The FRC’s approach to competition in the audit market; 
• Recent developments with competition in the audit market; and 
• The FRC’s current work on competition in the audit market.

The latest update provides a high-level summary of the recent developments in the audit market and the FRC's work to help realise a well-functioning audit market.

Feedback and comments are wel­comed by 29 Feb­ru­ary 2024.

A press release and the snapshot are avail­able on the FRC website.

As the FRC continues its work to restore public trust and confidence in audit, corporate reporting and governance, while embedding its remit to support UK economic growth and competitiveness, the draft plan and budget sets out how it intends to deliver on its strategic priorities.

The draft plan and budget provides details of the priorities and key deliverables of each of the FRC's five divisions (Regulatory Standards, Supervision, Enforcement, Corporate Services and CEO division) which highlight how the FRC intends to deliver on the Government's priorities set out in its new remit.  It also covers the operational requirements and resourcing of the FRC and the UK Endorsement Board (UKEB) and sets out targets to measure success.

In 2024-25 the FRC will pause planned further growth due to delays to legislation which would have given the FRC a broader remit and new powers and will instead prioritise existing resources.  The combined budgeted cost of the FRC and the UKEB is also set to increase to £72m from £66.3m in the prior year as set out in the proposed expenditure and funding budget. 

A press release and the draft plan and budget 2024-25 are available on the FRC website.

The FRC report highlights the extent of incomplete local government audits with 88% of 31 March 2022 audit not being complete by the publishing date of 30 November 2022 and a backlog of earlier audits from prior years.  As a result of the number of incomplete audits, the FRC's ability to inspect higher profile and higher risk audits was restricted.

Due to what the FRC calls 'failings in timeliness', for the 2022/23 inspection cycle the FRC selected local government audits for inspection from those finished in the 2022 calendar year (regardless of the financial year the audit related to) and had to temporarily reduce the number of local government inspections performed.  As a result, 10 inspections (six health and four local government audits) were performed in contrast to 20 inspections in previous years.    

The FRC indicates that all ten audits inspected required no more than limited improvements.  It highlights that all financial statement audits inspected were assessed as good or limited improvements required and comments that 'despite the severe restrictions placed on our monitoring by failings in timeliness, auditors have achieved the level of quality we expect on the audits that were available for us to inspect'.  However, the report does note that due to the restrictions on the FRC's ability to perform audit quality inspections, the results of its reviews 'cannot be relied upon to give a proper indication of audit quality in local government'.  The FRC also adds that its assessment of audit quality may reduce when it is able to inspect audits of higher profile and higher risk local government bodies.

The report identifies a number of areas where the FRC believes improvements in audit quality are required including audit procedures over expenditure and the auditor's work on the valuation of operational property and pensions.

To support the measures being developed to clear the backlog, the FRC announced its plans to perform no routine inspections of local government audits for financial years up to 2022/23, unless clear public interest demands it. The FRC will resume inspections once the system has been reset, which the FRC hopes will follow the implementation of the package of measures currently being developed by Government.

A press release and the full report is available on the FRC website

The Government Financial Reporting Manual (FReM) is the technical accounting guide to the preparation of financial statements. It complements guidance on the handling of public funds published separately by the relevant authorities in England and Wales, Scotland and Northern Ireland. The FReM is prepared following consultation with the Financial Reporting Advisory Board (FRAB) and is issued by the relevant authorities who are:

• HM Treasury 
• the Welsh Government 
• the Scottish Government
• the Executive Committee of the Northern Ireland Assembly
• the Department of Health and Social Care
• CIPFA/LASAAC

The FReM applies directly to all entities, and to funds, flows of income and expenditure and any other accounts that are prepared on an accruals basis and consolidated within Whole of Government Accounts (with the exception of the accounts of any reportable activities that are not covered by an Accounts Direction). It does not apply to Local Government, those Public Corporations that are not Trading Funds, and NHS Trusts, NHS Foundation Trusts and Clinical Commissioning Groups.

The FReM is separated into five sections:

• Part A: Purposes, principles and best practice
• Part B: Form and content of government annual reports and accounts
• Part C: Application of accounting standards for government annual reports and accounts
• Part D: Further guidance for government annual reports and accounts
• Part E: Additional guidance

The latest version of the FReM 2023-24 and 2024-25 are available on the HM Treasury website.

The review considers whether existing guidance is fit for purpose, examines compliance with existing guidance, and makes recommendations for how performance reporting can be improved in the future.

A press release and the full review are available on the HM Treasury website.