Using examples drawn from current practice, this paper explores how a small sample of FTSE 100 company audit committees address the external audit aspects of the reporting responsibilities assigned to them by The UK Corporate Governance Code.
The UK Corporate Governance Code (The Code) (FRC 2012) addresses the relationship between a company’s corporate governance committee and the independent external auditor. It does this in two main ways –by setting out, firstly, the issues relating to the external auditor and the external audit process that the committee should consider and, secondly, the issues concerning the external audit that the committee should report on externally to the members. As the examples cited in this exploratory report demonstrate, UK listed companies are making lengthy disclosures along the lines required by The Code.
A recent report by the FRC’s Financial Reporting Lab has, however, found that that investors are demanding more – they want audit committee reporting to be bespoke (rather than boiler-plated) and company specific, and for the most significant financial statement issues to be disclosed annually.
Using examples drawn from current practice, this paper explores how a small sample of FTSE 100 company audit committees address the external audit aspects of the reporting responsibilities assigned to them by The Code. At the time of writing (February 2014) it appears likely that the provisions of The Code will be updated to include the proposals of the Competition Commission issued in October 2013. Both the existing FRC requirement and the new proposals are summarised in Chapters 1 and 2.
The ‘real world’ disclosures selected to illustrate current good practice were drawn from a number of FTSE 100 companies shortlisted for one or more categories in the 2013 PwC Building Public Trust Awards. The examples are not necessarily ‘best practice’ but should be seen as illustrative of the way in which audit committees are trying to fulfil their responsibilities under the 2012 edition of The Code. The first section of the analysis also shows that some of the companies studied are responding well to the challenge of ensuring investor engagement.