Bob Semple, 7 January 2013, Chartered Accountants
If the number of recent Financial Reporting Council (FRC) publications is any measure, Audit Committee Members can look forward to even greater expectations of them in 2013. The purpose of this article is to summarise some of the more important recent developments and to suggest practical steps on how best Audit Committees should respond to them in the 2013 Audit Committee Work Plan – whether as a listed plc or simply striving for best practice.
“Corporate Governance Code[i]” and “Guidance on Audit Committees[ii]” – the new ‘Bibles’
Issued in September 2012, these documents are, in effect, the new ‘Bibles’ for Audit Committee Members. In replacing previous guidance, each document represents more of an evolution rather than a revolution; indeed, the Code Preface makes the point that “much more attention need[s] to be paid to following the spirit of the Code as well as its letter”. For all the talk of “spirit” however, the FRC is not shy in referring to a substantial body of complementary guidance, including:
- “Internal Control: Guidance to Directors[iii]”
- “Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009iii”
- “UK Stewardship Codeiii”
- “Boards and Risk iii”
- “Board Effectiveness iii”
not to mention ISAs, FSA Rules, Codes of Ethics, company legislation and more.
The consequence could present a quandary for the Audit Committee: religiously apply detailed rules or take the initiative to apply principles using skillful judgement and insight? More of that anon. For now, what are the key changes – over and above the already onerous programme of work for Audit Committees[iv]? Continue reading…