The UK’s Financial Reporting Council (FRC) has announced the launch of a web page “aimed at promoting better engagement between investors and audit committees to facilitate better understanding of companies and their approach to financial reporting and internal control.” The FRC said that this new resource is intended to assist investors that wish to engage with audit committees and companies on assurance-related topics. The FRC believes that direct conversations with audit committee chairs could provide investors with insights into the company's approach to regulatory issues and other areas of interest to market participants.
The FRC web page is organized by topic, with an initial broad question followed by more detailed follow-up questions. For example –
Conversation starter
Please give more detail about the significant issues the committee considered in relation to the financial statements.
Suggested follow-ups
How does the committee determine what makes an issue "significant"?
How have the significant issues been addressed?
How have these significant issues changed since last year? How do you expect them to change in the coming year? Are there any emerging issues which you expect to become significant in the future?
How did you decide which significant issues to include in the audit committee report?
What system(s) are in place to ensure the committee is able to monitor the evolution of significant issues and to identify further emerging issues?
While the FRC’s web page is written from a UK perspective and includes references to FRC documents as sources of further information, it could be useful to U.S. audit committees in understanding what information concerning the committee’s work might be of interest to investors. In addition, some suggested questions, while framed as inquiries that investors might make to an audit committee chair, could be rephrased as questions that committees might want to pose to their auditor or to management.
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