Bid to improve smaller company financial reporting
A new guide designed to help audit committees of smaller listed and AIM quoted companies improve their financial reporting has been published by ICAEW and the FRC.
Addressing issues raised by the FRC about the quality of financial reporting in this size sector, the guide provides practical tips and questions for audit committees to consider, in order to drive up the quality of smaller quoted company reporting.
The new publication, Smaller Listed and AIM Quoted Companies – A Practical Guide for Audit Committees on Improving Financial Reporting, offers practical, cost-effective suggestions on how smaller quoted companies can improve the quality of their financial reporting. It suggests questions for audit committees to ask themselves and those associated with the financial reporting process, including the board, chief financial officer, finance team and external auditors. The questions are designed to encourage smaller quoted companies to reflect on current practices and consider areas for improvement.
Dr Nigel Sleigh-Johnson, Head of the ICAEW Financial Reporting Faculty, said: “With responsibility for monitoring the integrity of the financial statements, the audit committee is well positioned to drive up the quality of financial reporting. By asking the right questions at the right time, audit committees can help bring about a step change in the quality of financial reporting."
An FRC discussion paper in 2015, Improving the Quality of Reporting by Smaller Listed and AIM Quoted Companies, found that while the system of financial reporting was not fundamentally flawed, there is a higher incidence of poorer quality annual reports by smaller quoted companies than by their larger counterparts. The FRC discovered that financial reporting is not always seen as a top-tier issue by smaller quoted companies. It also found that smaller quoted companies are not always up to date with the most recent reporting requirements.
The guide builds on key themes that emerged from the FRC’s 2015 discussion paper, which identified four areas where sharper focus could help companies improve the quality of their annual report and accounts. These areas are:
- adequate time and resources available to produce good quality annual reports;
- early engagement on the annual report by those charged with governance;
- deeper understanding of relevant reporting standards and requirements;
- and appropriate rigour by the auditor in the audit of financial statements and review of annual reports.
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