Financial Reporting zone

Financial reporting briefs: November 2007

The Financial Reporting Review Panel (FRRP) has announced that its review activity in 2008/09 will focus on the following sectors, which it considers to be under strain:
• Banking
• Retail
• Travel and leisure
• Commercial property
• House builders
Sectors are chosen by the Panel following a risk-based assessment and discussion with the Financial Services Authority and the FRC’s Standing Advisory Group. Banking, commercial property and house builders have replaced utility, telecommunications and media as focus areas, whereas travel and leisure and retail have been retained.

The FRRP will pay particular attention to disclosures relating to financing arrangements and risks and uncertainties in the light of credit market conditions at the time of approval of financial statements.

As in previous years, accounts will be selected for review on the basis of company specific factors and complaints. But in a change of focus, the FRRP has announced it will concentrate on companies outside the FTSE 350 and look to the lower end of the listed market instead, as well as the AIM and large private companies.
“We are shifting the emphasis away from the FTSE 350 towards the mid-tier companies, where risk is seen to be greater,” explained said Bill Knight, FRRP chairman. “Recent Panel reviews have shown that compliance is good at the top end of the listed market.”

12 November - APB Executive Director to sit on IAASB

Jon Grant, Executive Director of the Auditing Practices Board, has been appointed to serve on the International Auditing and Assurance Standards Board (IAASB) for three years commencing on 1 January 2008.

Jon Grant qualified as a Chartered Accountant in 1975 and was made a partner in Price Waterhouse (now part of PricewaterhouseCoopers) in 1984 where his positions included World Director of Audit Research and Technology. He was appointed as the former Auditing Practices Board's first Technical Director in 1996.
IAASB is a standard setting body, designated by, and operating under the auspices of the International Federation of Accountants (IFAC), and subject to the oversight of the Public Interest Oversight Board (PIOB).
Paul Boyle, Chief Executive of the FRC, welcomed Mr Grant’s appointment:
“The UK's auditing standards are currently based on the IAASB's standards and the European Union is considering making their use mandatory in the future,” he said. “Jon Grant's appointment to the IAASB is international recognition of his expertise and helps the UK remain influential in the development of international auditing standards."

5 November - APB reviews ethical standards for auditors

The Auditing Practices Board (APB) has concluded its review of the Ethical Standards for Auditors (ES) 2004. The Board said this involved “gathering views of interested parties, undertaking its own research and drawing on available third party research.”

“The existing ES seem to be meeting the needs of stakeholders and are working in practice,” the APB found, albeit aided by a few unrelated developments. The reduction in non-audit services provided by auditors to their audit clients was a cited as a factor in the decreased threat to auditor independence. This was complimented by what the Board described as the active involvement of audit committees, who were increasingly taken the issue of auditor independence into consideration.

However, there were differences in view as to whether the audit engagement partner of a listed company should be required to rotate after five years (the current UK requirement) or seven (which is more common internationally). The APB has put the issue out to consultation and those wishing to express a view could do so by making a comment on its exposure draft exposure draft by 31st January 2008. E-mails can be sent to h.osullivan@frc-apb.org.uk

Previous financial reporting briefs:

October 2007
Septmeber 2007
August 2007
July 2007