Increased transparency over accounting errors promised under new FRC procedures

Out-Law News | 09 Oct 2014 | 2:48 pm | 1 min. read

The body responsible for setting accounting standards in the UK will publish the names of companies that it forces to update their published annual reports.

The disclosures will be contained in annual reports published by the Financial Reporting Council (FRC) under new procedures it has finalised for the review of corporate reporting by its Conduct Committee.

The new procedures (17-page / 328KB PDF) explain how the Conduct Committee can require businesses to make changes to their published accounts for the purpose of clarification or correction. It also outlines when companies could be asked to disclose the changes and outline details of its exchanges with the Conduct Committee on the issue.

In addition to the disclosures by the companies, however, the FRC said that it would highlight cases where it has required financial reports to be altered in its own annual reports.  

"Those companies that make a significant change to their report and accounts, and at the request of the FRC refer to its intervention, a ‘Committee Reference’, will be identified in its Corporate Reporting Review annual report," the FRC said in a statement.

David Childs, chairman of the FRC’s Conduct Committee, said: "These amendments to the operating procedures will provide greater transparency to investors who rely on company reports and accounts to make and justify their long term investment decisions. They will help us to meet the expectations of a regulatory environment where increased transparency is both expected and required in order to enhance trust in corporate reporting."

Accounting standards are issued by the FRC to comply with its statutory duties under the Companies Act. They are intended to reassure investors that all companies are assessing and reporting on the same financial controls and systems, and producing consistent annual accounts that can be compared on a like-for-like basis. They apply to all companies and to other entities that are required to prepare accounts that provide a "true and fair view".