In 2013 the Competition Commission recommended that the FRC should require audit committees to publish the grade given to the audits inspected by its AQR team.  The FRC announced in April 2014 that it will consult on this recommendation in time for updates to the UK Corporate Governance Code to be made in 2016.  However, some Audit Committees have indicated that they may wish to implement aspects of the CMA’s recommendation in advance of these Code changes and so today's statement includes advice from the FRC on how to go about doing this.  The FRC advises that:

• In considering how to report on an inspection it is important that companies do not give false assurance to investors or raise unnecessary concerns.
• It is supportive of investors having additional and better information about the quality of an audit. However, the AQRs’ work is focussed on the audit and is not designed to comment on the contents of the report and accounts.  It also generally covers only selected aspects of the audit and is not designed to confirm the audit opinion.
• Where a company’s audit has been reviewed by the AQR, the Audit Committee should consider whether any of the findings are significant for the purposes of putting together their report on how they have assessed the effectiveness of the audit process (as required by the Code) and, if so, make appropriate disclosures.  The FRC would expect audit committees to discuss the findings with their auditors as part of this process.
• In making their report, Audit Committees should not disclose the inspection grade.  The FRC is concerned that the publication of this could be misleading, as the current grading system was designed to help audit committees understand the significance of the issues identified and not intended to provide an assessment of the reliability of the financial statements as a whole or the audit opinion.

In line with this advice, the FRC has stated that it will waive its confidentiality rights to the information, other than the grade awarded to the audit, contained in the AQR reports for the sole purpose of allowing the company and its auditor (who also has confidentiality rights) to determine how and what information arising from the inspection is reported to shareholders.

The full statement can be obtained from the FRC website.

Topics discussed were:

• Overview of current and future activities
  Activities in the next six months will mainly focus on taxonomy updates for new standards, additional common practice and translations of element labels, trials of the IFRS Taxonomy due process, review of the licensing terms, continued work on the IFRS Taxonomy jurisdictional profiles, and additional education material.
• Use of the IFRS Taxonomy
  The staff plans to publish a new set of materials covering how to best use the IFRS Taxonomy.
• Management of entity-specific disclosures
  The staff is assessing whether amendments to the IFRS Taxonomy or supporting materials can be made that would result in better handling of entity specific disclosures.
• Content review
  The ITCG reviewed proposed amendments to the IFRS Taxonomy in connection with the disclosure initative exposure draft expected to tbe published soon as well as changes to the IFRS Taxonomy resulting from amendments to IFRS 9 and related amendments to IFRS 7.
• Common practice
  The ITCG members discussed the 2014 Common Practice project, especially common elements that do not fit into the IFRS Taxonomy structure and general or specific elements and undefined terms.
• Use of the Versioning 1.0 Specification
  The staff reported that specific Versioning 1.0 Specification functionalities such as ‘assignment categories’ and ‘versioning dimensions’ are currently not being used within the IFRS Taxonomy and asked members of the ITCG for their views on the costs and benefits of new functionalities.
• Updates from ITCG members and observers
  There were reports from ESMA, the SEC, the FASB and on developments in South America, China and Indonesia.

Please click for access to the meeting notes on the IASB website.

There will be a presentation of tips for the coming reporting season based on the FRC's recently published Corporate Reporting Review Annual Report 2014.

This initiative, which has been developed by the International Integrated Reporting Council (IIRC) in partnership with the Chartered Institute of Public Finance and Accountancy (CIPFA), will see several public sector bodies begin to explore the adoption of <IR>.

Organizations already signed up include the World Bank Group, the United Nations Development Programme (UNDP), the City of London Corporation, the Welsh Government and UK government departments. In attendance at the conference were representatives from the United Nations Development Programme (UNDP), the UK National Health Service (NHS), and the International Public Sector Accounting Standards Board (IPSASB).

The press release and a page dedicated to the new Network can be found on the IIRC website.  More detail about the development of this Network can be found in our previous UK Accounting plus news item.

The European national en­forcers of fi­nan­cial in­for­ma­tion monitor and review fi­nan­cial state­ments pub­lished by issuers with se­cu­ri­ties traded on a reg­u­lated European market and who prepare their fi­nan­cial state­ments in ac­cor­dance with International Fi­nan­cial Re­port­ing Stan­dards (IFRS) and consider whether they comply with IFRS and other ap­plic­a­ble re­port­ing re­quire­ments, in­clud­ing relevant national law.

ESMA has de­vel­oped a con­fi­den­tial database of en­force­ment de­ci­sions taken by in­di­vid­ual European en­forcers as a source of in­for­ma­tion to foster ap­pro­pri­ate ap­pli­ca­tion of IFRS.

The pub­li­ca­tion of en­force­ment de­ci­sions is designed to inform market par­tic­i­pants about which accounting treat­ments European national en­forcers may consider as com­ply­ing with IFRS, i.e. whether the treat­ments are con­sid­ered as being within the accepted range of those per­mit­ted by IFRS. ESMA con­sid­ers the pub­li­ca­tion of the de­ci­sions, together with the ra­tio­nale behind them, will con­tribute to a con­sis­tent ap­pli­ca­tion of IFRS in the European Union.

Topics covered in the latest batch of extracts, covering the period from August 2012 to March 2014, include:

Click for access to the full report (link to ESMA website).

Mr Alan Beller was Director of the Division of Corporation Finance of the US Securities and Exchange Commission (SEC) and a Senior Counsellor to the SEC from January 2002 until February 2006. Mr Beller's tenure at the SEC saw far-reaching corporate governance, financial disclosure and securities offering reforms, including the implementation of the corporate provisions of the Sarbanes-Oxley Act of 2002.

Dr Werner Brandt is the Chairman of the Board of the German Financial Reporting Enforcement Panel (FREP) and was a member of the Board of the Accounting Standards Committee of Germany (DRSC) from 2003 to 2011, in which he played a leading role in defining the future positioning and structure of the DRSC.

An agenda with supporting papers and details on how to register for the public meeting can be found on the EFRAG website.