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Governance in brief — FRC advises audit committees to take care with disclosure of AQR findings

Published on: 25 Nov 2014

This publication from Deloitte discusses the Financial Reporting Council's (FRC's) statement setting out advice to audit committees when implementing the Competition and Markets Authority (CMA) recommendations around disclosure of Audit Quality Review (AQR) findings by FTSE 350 companies.

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 the FRC statement includes advice from the FRC on how to go about doing this.
 
The FRC cautions audit committees to take care if they wish to mention that an Audit Quality Review (AQR) inspection has taken place of the audit file of their company.  In particular, the inspection grade must not be disclosed and care must be taken not to imply that the FRC endorses the financial statement judgements. 
 
The FRC will be consulting on the CMA’s request to address disclosure of audit inspection findings during 2015 and 2016 with a view to introducing relevant Code changes in 2016.

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