Here is the Financial Reporting Council press release, which highlights the principal proposed changes to the Codes and Standards and contains links to the consultation documents.
The press release also contains links to revised drafts of the Codes and Standards.
If adopted, these changes will apply to financial years beginning on or after 1 October 2012.
This consultation is the next step in the FRC’s “Effective Company Stewardship” project to enhance the effectiveness of the stewardship role of boards and audit c0mmittees through corporate reporting and audit. We discussed the project in this post of September 2011.
The FRC press release summarises its proposed changes:
“• Requesting FTSE 350 companies to put the external audit contract out to tender at least every ten years;
• Asking boards to explain why they believe their annual reports are fair and balanced;
• Encouraging more meaningful reporting by audit committees;
• Providing more guidance on explanations that should be provided to shareholders when a company chooses not to follow the Code; and
The new Code will also embody provisions previously announced requiring boards to report on their gender diversity policies.”
On reporting gender diversity policies, see our post of October 2011.
“• Clarifying what is meant by stewardship, and the respective responsibilities of asset owners and asset managers; and
• Asking investors to disclose their policy on stock lending, and whether they recall lent stock for voting purposes.”
“• Enhancing auditor communications by requiring the auditor to communicate to the audit committee information that the auditor believes the committee will need to understand the significant professional judgments made in the audit; and
• Extending auditor reporting by requiring the auditor to report, by exception, if the board’s statement of why the annual report is fair and balanced is inconsistent with the knowledge acquired by the auditor in the course of performing the audit, or if the matters disclosed in the report from the audit committee do not appropriately address matters communicated by the auditor to the committee.”
The Auditing Standards consultation paper notes that a key objective of the Effective Company Stewardship project is “is to enhance the relevance and value of the audit for users and the public by stimulating greater transparency about the judgements made by management and auditors in the course of preparing and auditing financial statements”.
For other posts concerning the FRC, see here.