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Corporate Reporting Review


In its Corporate Reporting Review work, the Financial Reporting Council's (FRC’s) Conduct Committee considers whether the directors’ reports and accounts of public and large private companies comply with the law (and hence, indirectly, applicable accounting standards). It also focuses on the quality of the reporting. It keeps under review interim reports of all UK listed companies and the annual reports of non-UK incorporated entities with a UK listing. The Conduct Committee maintains a Financial Reporting Review Panel  (FRRP) that includes a wide and balanced representation, at the most senior level, of businesspeople, accountants, lawyers and preparers and users of accounts so that those who come before a Review Group of the FRRP know that they are judged by their peers within the financial reporting community.


Selection of reports and accounts for review

In carrying out its corporate reporting review work the Conduct Committee takes a risk-based approach to the review of financial statements. They review a sample of listed company reports and accounts each year, focussing on priority sectors such as:

  • travel, hospitality and leisure;
  • retail;
  • property; and
  • financial services.

It aims to review the FTSE 350’s report and accounts in full at least once every five years with at least one thematic review in between.

In addition they may review accounts that are the subject of a complaint.


Undertaking a review

The FRC’s  staff will carry out an initial assessment of a report and accounts and make a recommendation to the Corporate Reporting Review (CRR) Committee of the FRC’s Conduct Committee. That analysis and recommendation is considered by the Committee to determine whether there is, or may be, a question whether a Report complies with relevant accounting or reporting requirements. The CRR Director may write to the company’s Chairman (sending a copy to the Finance Director and Audit Committee Chairman where practicable) requesting further information where necessary.

If the Committee concludes that no action is needed, or the company’s directors have already proposed to rectify the situation, the matter may be concluded. If it is not, the Corporate Reporting Review Committee will be asked to consider opening an enquiry. If an enquiry is opened, a Financial Reporting Review Group will be convened of at least five members. These are drawn from a Financial Reporting Review Panel of suitably qualified individuals. Typically each panel will include the chairman and one of the other members of the CRR Committee, and at least one lawyer.

The Review Group may make such enquiries as they consider necessary, including requesting further information from the company under review. Again, a company may agree a course of action with the Review Group which is satisfactory and which will end the matter.

If agreement cannot be reached, the Review Group may write to the company under review indicating that they will refer the matter to the Conduct Committee recommending that the Conduct Committee applies to the Court for an order requiring the directors to revise the financial statements. They will provide the company with an opportunity to write to or meet with the Review Group to persuade that Group that the relevant report and accounts do comply with the law or propose corrective or clarification action.


Enforcement action

Many investigations are completed before a Review Group is established, or by providing the Review Group with proposed corrective or clarification actions. These can include as necessary voluntary revision of the previously issued report and/or accounts or a separate corrective or clarification action such as correcting the matter in the next interim or annual report.

If the Review Group is still not satisfied by the company’s explanations and/or proposals for corrective or clarification action, they will write one last time to the company’s chairman giving them fourteen days to respond before the matter is referred to the Conduct Committee. Unless appropriate action is taken, the Conduct Committee may then refer the matter to the Courts for an order directing the company to revise the report and/or accounts.


Publicity for cases

The Conduct Committee reserves the right for an announcement to be made if a company makes a significant corrective or clarification change as a result of its intervention.

An FRC press release may also be issued at an earlier stage if the fact of an enquiry has already become public, or it is in the public interest to announce that an enquiry is under way. If an enquiry has been made public, the FRC will offer to issue a subsequent press notice if no regulatory action is then found to be necessary.

The FRC also publishes an annual report summarising its actions for the year and suggestions for action by directors for the future. It may also issue other generic press notices if common issues come to light where they believe further attention may be needed.


Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.