Background

In 2022 the Government Response to the BEIS White Paper asked the FRC to use a Code-based approach to strengthen boardroom focus on internal control matters rather than introducing a legislative requirement and that represented one of the most significant changes proposed. Other proposals included:

• Inclusion of wider responsibilities and considerations for the Board and Audit Committee in relation to Environmental, Social and Governance (ESG) objectives and other sustainability matters
• Incorporation of requirements for an Audit & Assurance Policy (AAP) and the Resilience Statement
• Reflecting the publication of ‘Audit committees and the external audit: Minimum Standard’
• Strengthened reporting on malus and clawback remuneration arrangements
• Some other areas of reporting on governance arrangements identified as being weaker

The revised Code would be supported by updated guidance with revisions to the Guidance on Audit Committees and Guidance on Board Effectiveness so that they could be aligned with the revised Code and Audit Committee Standard.  To take account of changes to the principles and provisions on risk management and internal control, the FRC would also amend the Guidance on Risk Management, Internal Control and Related Financial and Business Reporting.

Status of the project

In May 2023 the FRC published the consultation with comments requested by 13 September 2023.  In November 2023 the FRC reaffirmed its proposals to issue a revised Code in January 2024 in light of the Government's withdrawal of proposed secondary legislation laid in July covering the Audit & Assurance Policy, the Resilience Statement, the Material Fraud Statement and enhanced reporting on distributions.  A new Code was issued on 22 January 2024 with supporting guidance issued shortly thereafter.