Our Financial Reporting and Corporate Governance Expert Groups contributed to our response to the FRC consultation – Revised Operating Procedures for reviewing corporate reporting.
Although we generally supported any changes to the Operating Procedures that increase the speed with which the FRC's Corporate Reporting Review (CRR) team review cases, we noted our concern that the decision to transfer primary decision-making to FRC staff and reducing the level of review from a two to a one-stage process could lead to both more compliance-based decisions, thus reducing the level pragmatic decision-making, and a rise in staff costs. We noted that the current review process helps avoid 'group think' and introduces a valuable external perspective separate from the staff involved in the detailed review.
We also noted our concern regarding the intention to publish lists of companies whose reports have been reviewed and cases closed, regardless of the extent or outcome of the review. We argued that this could lead to harmful misinterpretations. We commented that the current position whereby committee references and press notices are used to highlight certain cases continues to be appropriate.
We added that this process provides investors with useful information where appropriate and avoids the risk of companies having to spend time explaining correspondence with a CRR team that has resulted in a relatively minor or, in some cases, no changes.