Learning lessons from the financial crisis
The Financial Reporting Council (the FRC) today announced an inquiry (the Inquiry) to “identify lessons for companies and auditors addressing going concern and liquidity risk”. This follows the FRC’s work on these “critical corporate reporting and audit issues” during the extreme stages of the financial crisis. As a result of that work, in November 2009 the FRC updated its publication “Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009“.
The Inquiry will be launching a call for evidence in the near future and will look to receive input from executive and non-executive directors, members of audit committees, the auditing profession, shareholder representatives, providers of capital and others. The Inquiry is expected to provide preliminary conclusions in summer 2011 and final recommendations by the end of 2011
Inquiry supports the FRC’s work on “Effective Company Stewardship – Enhancing Corporate Reporting and Audit”
The Inquiry is designed the support’s the FRC’s work, launched in January 2011, on “Effective Company Stewardship – Enhancing Corporate Reporting and Audit“, which aims to consider how the effectiveness of the stewardship role of boards and audit committees can be enhanced through corporate reporting and audit. The Inquiry’s terms of reference as set out in the FRC’s announcement are wide-ranging and include:
- How companies ensure the adequacy, timeliness and reliability of the internal information used to monitor going concern and liquidity risk; and
- Whether the going concern and liquidity risk disclosures required by IFRS, the UK Corporate Governance Code and the Listing Rules provide timely and relevant information for all stakeholders.
The Inquiry will also add to the FRC’s contribution to the Department for Business, Innovation and Skills initiative on “The Future of Narrative Reporting” and to the House of Lords Economic Affairs Committee inquiry into “Auditors: Market Concentration and Their Role“.
UPDATE 11 May 2011: The Inquiry is to be led by Lord Sharman and has launched a call for evidence, as we discuss in this post.
UPDATE 3 November 2011: The Sharman Inquiry has now issued its preliminary report and recommendations, as we discuss in this post.
UPDATE 14 June 2012: The Sharman Inquiry has now published its final report, as we cover here.
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