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AIA

Accountants fret over FRRP changes

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20th Mar 2012
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Draconian plans for the Financial Reporting Review Panel (FRRP) to share more information with the Audit Inspection Unit (AIU) and to name companies that breach accounting rules could undermine trust in auditors, the accounting profession has warned.

under recently published revised operating procedures the FRRP will swap notes with the Audit Inspection Unit (AIU) and may publicise “significant changes” or errors in companies’ accounts.

Following a consultation process by the Department for Business (BIS) the FRRP, which acts as an accounting watchdog within the Financial Reporting Council, will also reserve the right of to make a public announcement when it requires a company to make a significant change or restatement, “whether corrective or clarificatory”.

In general, respondents to the consultation supported the proposal to share information with the AIU, the FRRP said in its summary of the consultation responses.

But not all accounting firms were happy with the proposal. Deloitte said in its consultation response that the FRRP’s proposal to share information with the AIU risks “damaging the audit/ company relationship by creating unease on the information passing from the AIU to the FRP or vice versa”.

Respondents were more guarded about the proposal to make directors announce where changes to their next report and accounts if they have not formally acknowledged that the previous accounts were defective. 

Some respondents were worried that changes in a company’s accounting or corporate reporting after an intervention by the FRRP would be perceived as the correction of an error and an indication that the accounts were defective, the FRRP said.

Respondents also thought that the proposal might make companies less willing to work on a consensual basis with the FRRP. The FRRP could make announcements even if the company’s directors do not believe the accounts to be defective, or the matter of concern is capable of different interpretations.  

The Hundred Group of finance directors said that it would prefer the FRRP to take a “more cautious” approach when making public statements about companies’ accounts.

The ICAEW said it did not believe it was appropriate for the FRRP to always name a company when making announcements about changes to company accounts. “The current regime has worked well to drive up the quality of reporting and it would be regrettable if further progress were jeopardised by an inappropriately ‘hard touch,’”, the ICAEW said in its consultation response.

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By njpandya
20th Mar 2012 23:31

FRRP changes

This is a sort of good news atleast the accounting procedures will get improved.

But if FRRP intention is to point a finger at accounting anomalies and put the blame on accounts than, what is the point in doing audit.

Might be auditors themselves don't know whether the same thing is explained in different way.

 

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