The Financial Reporting Review Panel today published revised operating procedures which aim to improve the transparency of the processes through which the Panel conducts its enquiries.

The Panel seeks a consensual response from companies with a view to improving the quality of corporate reporting, and the amendments to the operating procedures do not affect this.

Following public consultation and approval by BERR, the key changes, broadly as proposed in the consultation document :

• provide that the Panel will copy its first letter to a company (which is sent to the chairman) to the finance director, where practicable (paragraph 15);
• set out the way in which the Panel manages conflicts of interests when appointing Panel groups (paragraph 24);
• allow the Panel to copy the letter to a company closing a case to the senior partner or chairman of the company’s auditors (paragraph 34);
• confirm that a Panel group will take legal advice and discuss the matter with the chairman of the Financial Reporting Council before writing a final letter to the chairman of a company indicating the Panel’s intention to apply to court (paragraph 36);
• confirm the terms on which the Panel receives information (paragraph 46);
• permit the Panel’s processes to be subject to independent audit, subject to appropriate confidentiality restrictions (paragraph 58); and
• allow the substance of some cases to be published to assist in the harmonisation of international accounting requirements (paragraph 66).

Further drafting amendments have been made to take account of the appointment of a second deputy chairman and to clarify existing practices.

Statutory references in the operating procedures have also been amended to take the Companies Act 2006 into account.

The revised operating procedures apply to all cases where the Panel’s initial letter is sent to the company on or after 1 September 2008.

1. The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance. Its functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy and Actuarial Discipline Board) and by the FRC Board. The Committee on Corporate Governance assists the Board in its work on corporate governance.
2. The role of the Panel is to examine the annual accounts of public and large private companies to see whether they comply with the requirements of the Companies Act 1985 (‘the Act’), including applicable accounting standards. Following implementation of the Accounting Regulation (EC) No. 1606/2002, this may mean compliance with UK or International Financial Reporting Standards.
3. Where breaches of the Act are discovered the Panel seeks to take corrective action that is proportionate to the nature and effect of the defects, taking account of market and user needs. Where a company’s accounts are defective in a material respect the Panel will, wherever possible, try to secure their revision by voluntary means, but if this approach fails the Panel is empowered to make an application to the court under section 245B of the Companies Act 1985 for an order for revision. To date no court applications have been made.
4. The Chairman of the Panel is Bill Knight and the Deputy Chairmen David Lindsell and Ian Wright. There are currently 24 other Panel members drawn from a broad spectrum of commerce and the professions. Individual cases are normally dealt with by specially constituted Groups of five or more members.
5. All Press enquiries should be directed to: Carol Page on tel: 020 7492 2460 or email: c.page@frc-frrp.org.uk.