FRC probes nearly half of company accounts reviewed

The Financial Reporting Council (FRC) has written to just under half the companies whose accounts it has recently reviewed, asking the boards for clarification on concerns around corporate reporting

The latest public listing from the FRC’s corporate reporting review (CRR), shows that 31 out of the 66 companies faced a full review and were the subject of ‘substantive correspondence’ questioning their reporting activities, particularly focusing on revenue recognition, measurement, as well as the quality and level of disclosures.

Of the companies on the list, 25 were subject to a ‘limited review', which the FRC says may be triggered by a complaint, although it does not identify which these are.

‘The routine reviews generally cover all parts of companies’ reports and accounts over which the FRC’s conduct committee has statutory powers (that is, strategic reports, directors’ reports and accounts),’ the FRC said in a statement.

‘Limited scope reviews arise for a number of reasons, including those conducted when company reports and accounts are selected for thematic review, and may include reviews that have been prompted by a complaint.

‘In accordance with the conduct committee’s operating procedures, the corporate reporting review does not identify those companies whose reviews were prompted by a complaint.’

The information published by the regulator is very limited and does not show what aspects of specific reporting caused concern, merely flagging that there was an issue.

The FRC says it ‘may write to a company if it appears that there is, or may be, a question whether there is a breach of the relevant accounting and reporting requirements. However, questions may be answered satisfactorily by the company without making significant changes to its corporate reporting’.

The onus is on the company involved to comment on the nature of its correspondence with the FRC but investors may draw conclusions if no details are forthcoming.

The FRC only agreed to start publishing the names of probed companies in 2017 to ensure additional transparency for the investment community. The change applies to companies reviewed as part of the corporate reporting review’s 2017/18 reporting cycle.

Those companies facing a full review included British Land Company, DS Smith, Experian, JRL Group Holdings, Midwich Group, Paypoint and Speedy Hire.  

Names are published once the company has published its next report and accounts and has had the opportunity to explain the issues raised by the FRC.

FRC public listing - corporate reporting review, issued 28 Sep 2018

Report by Rob Munro, additional reporting by Sara White

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