FSA and FRC enhance information exchange

by Gill Montia

Story link: FSA and FRC enhance information exchange

The Financial Services Authority (FSA) and the Financial Reporting Council (FRC) are enhancing their level of co-operation and information sharing, having today signed a new Memorandum of Understanding on accounting and disclosure issues.

The move should enable the regulators to improve their oversight of the audits of authorised firms, particularly as the FRC’s Audit Inspection Unit has recently extended its scope to include all banks incorporated in the UK.

The FSA’s accounting and auditing sector leader, Richard Thorpe, says: “Our recent discussion paper highlighted our concerns that some auditors may not be exercising sufficient professional scepticism in their approach to the audit of key areas of management judgment.”

The FRC’s director of auditing, Paul George, adds: “This agreement ensures that the dialogue established during the financial crisis is both durable and meaningful.”

Last week, the FRC made it clear that company reports should provide explanations of how directors identify and manage risk, including “what keeps them awake at night”.

In a set of recommendations aimed at improving the dialogue between company boards and their shareholders, the body suggested that annual reports and accounts should be much more than marketing documents, including reports by the chairman and chief executive.