UK lays out post-Brexit #corpgov strategy

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 It is important for the UK to continue to retain its reputation across the globe for the trustworthiness of corporate reports and for audit quality which attracts investment, Sir Win Bischoff, the Financial Reporting Council’s (FRC) chairman said at the recent Financial Services Brexit Summit.

Bischoff said that as the  UK moves towards Brexit the FRC was discussing with its stakeholders – those it regulates and those who benefit from its activities, including broader society and the government – the key issues that the FRC believes will need to be tackled in order to retain this reputation.

He said, “We have taken some first steps in corporate governance. The government’s interest in making business work for everyone, means we are considering how our governance principles best meet the wider demands of all stakeholders or need to be amended.”

“On accounting standards we will need to apply and enforce international standards that at present come to us from the EU. Investors have told us they want comparability between the accounts of UK listed companies and those listed in other countries.”

Sir Win Bischoff

Sir Win Bischoff

Bischoff noted that in respect of audit the UK has only recently – in June 2016 – introduced new standards and rules based on the European Audit Directive. There was no mood to reverse this he said and the UK had a proud record for high quality in audit work. However, Bischoff added that the FRC  may tweak the standards to ensure UK based auditors continue to lead the world in quality. To do this though we will need to agree arrangements for equivalence of audit qualifications and the portability of staff he said.

“After Brexit it is likely that UK auditors will want to access important markets outside Europe including the USA, China and other fast growing countries of Asia. Consequently some of the focus must be to ensure access to these markets,” Bischoff added.

The goal for the FRC is that the UK remains a global centre of excellence for accounting and audit, and a magnet for global investors’ capital Bischoff said. In this there are a number of factors that play in its favour he said. He noted that the International Accounting Standards Board, which sets the standards used by the majority of companies across the globe, is based in London; the FRC is admired internationally for its high standards of regulation; the professional bodies that the FRC oversees have significant global reach and an excellent ‘product’. and the UK has developed over the last 25 years strong corporate governance principles.

It is right, even for us as regulator, to point out that the profession in the UK is strong. It is entirely appropriate therefore to promote continuing access to it for the benefit of UK Plc,”  Bischoff said.
Separately the FRC has issued guidance which it believes will help preparers of annual reports of around 1,200 large and smaller listed companies to make improvements to annual reports in the 2016 reporting season and to foster investment in the UK.
The FRC said the strategic report should be presented in a user-friendly, clear and concise manner. Furthermore, in an era where, for example, cyber-risk, climate change and Brexit pose economic, social and environmental uncertainty, the FRC said it encourages companies to consider a broad range of factors when determining principal risks and uncertainties facing the business and performing their analysis for the viability statement.

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