The Financial Reporting Council (FRC) and the Institute of Chartered Accountants in England and Wales have published a new guide. It aims to improve the quality of financial reporting for smaller listed and AIM quoted companies, having identified that such companies may face particular challenges including having adequate time and resources to produce good quality annual reports and having a deeper understanding of relevant reporting standards and requirements.
The guide is very practical and outlines tips and questions that audit committees can consider asking in order to challenge management on the company’s current financial reporting practices. These include:
- questions for the audit committee to ask the CFO and finance team at the start of the financial year;
- questions to test the skillset and experience of the finance team in order to ensure there are adequate resources; and
- questions for the audit committee to ask the auditor at various stages during the audit process.
The guide recommends the FRC’s Annual Review of Corporate Reporting, published every October and available from the FRC website, as a good starting point for audit committees wanting to improve the financial reporting cycle. It acknowledges that audit committees have a vital role to play in helping to bring about a step change in the quality of financial reporting by smaller companies.