FRC/FCA advice for companies and auditors of financial accounts

The Financial Reporting Council (FRC) and the Financial Conduct Authority (FCA) have published updated guidance for companies and auditors to ensure high quality financial information continues to flow to users to support decision-making

As the busiest period of the year for finalising company accounts approaches, remote working, travel restrictions, home schooling, staff sickness and the uncertain economic outlook continue to have a major impact on the preparation of financial accounts. 

Listed companies are allowed an additional two months to publish their audited annual financial reports, which means within six rather than four months of the financial year end date.

There is also an extended period for filing accounts at Companies House. Currently the deadline for filing any accounts with Companies House is extended by three months.

While this automatic extension expires on 5 April 2021 it will be replaced with an application process to Companies House, with companies granted a discretionary three-month extension where they cite coronavirus as a factor impacting the timely completion and/or audit of accounts.

Only one filing extension is permissible for an accounting period and the extension cannot take the filing date later than 12 months after the end of the accounting period.

Given the heightened risk, challenge and uncertainty, audit committees may consider it appropriate to set out in their annual report the work they have undertaken, and the measures they have agreed to ensure high-quality reporting and audit for the period affected.

This might include how they have ensured they have allowed enough flexibility in the year-end timetable to complete all the necessary work to an appropriate standard that will meet investor and stakeholder expectations.

Robust and efficient capital markets rely on high quality financial information and where necessary, the joint guidance encourages preparers and auditors to allow more time to publish their financial accounts, making use of available flexibilities. 

Along with these measures, the FRC and FCA strongly encourage investors, lenders and other users of financial statements to take into account the unique set of circumstances arising from Covid-19.

Recognising the heightened challenges in preparing and auditing financial information, the FRC and FCA encourages all stakeholders to re-familiarise themselves with these measures, to use them if appropriate, and to view such use as normal practice during this period of heightened challenges.

The FRC’s executive director of regulatory standards, Mark Babington said: ‘As the busiest period of the year for the preparation and audit of financial accounts approaches, it is paramount that investors and users of financial information continue to receive high quality financial information.  

‘While companies and auditors face increased challenges in preparing their accounts, the joint measures allow for additional time to ensure high quality reporting.

‘Companies, auditors and investors should familiarise themselves with the latest guidance during these uncertain times to ensure they are managing reporting frameworks and stakeholder expectations appropriately.’  

The updated guidance is available here

Sara White |Editor, Accountancy Daily, published by Croner-i

Sara White is editor of Accountancy Daily, published by Croner-i, and in...

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