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April 19, 2012

FRC limits ten-year retendering to FTSE 350

The Financial Reporting Council (FRC) plans to limit the scope of its suggested ten-year audit retendering to FTSE 350 companies only.

In a consultation on a possible revision of the UK Corporate Governance Code and International Standards on Auditing (UK and Ireland) the watchdog has watered down its initial proposal to include all listed companies in the ten-year retendering to the FTSE 350 only.

The FRC said it made the amendment because of expectations the market would struggle to cope with overwhelming requests leading to the greater resources of the Big Four being favoured.

The consultation also requests the FTSE 350 follow the ‘comply and explain’ rule.

The Institute of Chartered Accountants of England and Wales has not fully welcomed the FRC proposal and its executive director Robert Hodgkinson said while tendering could enhance transparency the decision on the choice of auditor should remain with the audit committee based on their assessment of a company’s needs.

“These should place emphasis on factors such as quality, innovation and communication, as well as price. The audit committee still has to be accountable to shareholders for its choice,” Hodgkinson explained.

Other proposed changes relate to the Stewardship code and include a clarification of what is meant by stewardship and a request to investors to disclose their policy on stock lending.

According to the outcome of the consultation, possible changes will apply to financial years beginning on or after 1 October.

 

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