The UK Financial
Reporting Council (FRC) has unveiled proposals to enhance dialogue
between company boards and shareholders and improve transparency in
corporate reporting and audit.

The FRC’s report
‘Effective Company Stewardship: Enhancing
Corporate Reporting and Audit’, contains seven key
recommendations to improve transparency and narrative of
annual reports.
FRC chief executive Stephen Haddrill said corporate reports have
become more cluttered, reducing their value to
investors.

“Annual reports are more
than marketing documents: they are a vital source of narrative and
financial data which are used by shareholders to make investment
decisions,” Haddrill said.

The FRC says annuals
reports should show:

  • More widespread
    recognition of the importance of audit committees and greater
    emphasis on their contribution to the integrity of financial
    reporting,
  • Greater transparency in
    the way that audit committees discharge their responsibilities in
    relation to the integrity of the annual report, including oversight
    of the external auditors,
  • More information about
    the audit process, both for audit committees and for investors and
    a broadening of the scope of the auditor’s
    responsibilities,
  • Higher quality
    narrative reporting, particularly on business strategy and risk
    management, and
  • More accessible Annual
    Reports through the use of technology.

The FRC said it will
consult on whether the finished guidelines should apply to all
listed companies, to those in the FTSE 350 or to another
group.