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Financial Reporting Council consults on Audit Firm Code and board succession

The Financial Reporting Council (FRC) has issued two consultations as part of its ramped up efforts to implement the EU Audit Regulation and Directive regime and strengthen investor confidence in governance.

Board Succession Planning

Following its October discussion paper UK Board Succession Planning -the FRC is now seeking input and feedback on how to achieve diverse and successful boards in the UK. Issues addressed in the paper include the role of the nomination committee and the role of institutional investors in the appointment of executive and non-executive directors. Respondents have until 29 January 2016 to respond and all feedback should be sent to successionplanning@frc.org.uk.

Audit Firm Governance Code

The Audit Code, originally issued in 2010 was reviewed in May 2015. In its feedback report the FRC said respondents had indicated that:

  • The purpose of the Code should be clarified. Its primary role should lie in audit quality, but good governance should also be promoted across the firms as a whole.
  • The role of independent non-executives was important and could be strengthened in some areas. In particular investors wanted to hear more from independent non-executives directly about their work and views on the firms’ performance on audit.
  • The firms should consider over time adopting provisions of the Corporate Governance Code not currently in the Audit Firm Governance Code.
  • The firms should maintain and grow the efforts they have built to engage with investors.

The FRC’s Chief Executive , Stephen Haddrill said, “The Audit Firm Governance Code has led to an enhancement in governance of the major firms who have put significant effort into adopting its key provisions. Above all it creates, through the independent non-executives, an independent voice and challenge at the heart of the firms, which is of particular importance in view of their public interest responsibilities. The proposed new provisions will strengthen this voice further, provide clarity about the Code’s purpose particularly in relation to audit quality and encourage further transparency to investors.”

Comments  on the proposed revised Code can be made to to Susan Currie (s.currie@frc.org.uk) by 11 March 2016.

 

 

What do you think?