The Financial Reporting Council (FRC) has launched a public consultation on proposed revisions to the UK Corporate Governance Code. This follows the UK Government’s response to the white paper, ‘Restoring Trust in Audit and Corporate Governance’, which identified areas of reform related to a particular focus on directors’ responsibilities for internal control, risk, audit and corporate reporting.
This limited revision of the Code is the first for five years and it aims to enhance the Code’s effectiveness in promoting good corporate governance. There are five primary areas of focus:
- Revising those parts of the Code that deal with the need for a framework of prudent and effective controls to provide a stronger basis for reporting on and evidencing their effectiveness.
- Making necessary revisions to reflect the responsibilities of the board and audit committee for sustainability and ESG reporting and appropriate assurance in accordance with a company’s audit and assurance policy.
- Amending the Code to take account of the new Audit Committee Standard (Audit Committees and the External Audit: Minimum Standard).
- Improving the functioning of comply-or-explain where reporting is currently weaker, taking account of recently published FRC research and reports.
- Updating the Code to ensure that it aligns with changes to legal and regulatory requirements as set out in the Government’s response to the White Paper, including strengthening reporting on malus and clawback arrangements.
The FRC will also review the existing guidance which supports the Code: Guidance on Audit Committees, Guidance on Board effectiveness, and Guidance on risk management, internal control and related financial and business reporting. The public consultation will also be supported by a wide range of stakeholder outreach and information.
FRC CEO Jon Thompson, said: “We are pleased to launch this consultation on the proposed revisions to the Corporate Governance Code.
“Good corporate governance contributes to long-term company performance by helping to build an environment of trust, transparency, and accountability necessary for fostering long-term investment, financial stability, and business integrity. Enhancing the Corporate Governance Code will meet the needs of all corporate stakeholders, including investors, employees and suppliers, and boost the resilience of the UK economy, ensuring it continues to attract talent and investment. We look forward to receiving feedback from stakeholders and using this feedback to continue restoring trust in audit and corporate governance.”
Commenting on the public consultation, PwC UK head of audit, Hemione Hudson, said: “It’s good to see progress being made and we welcome efforts to continue driving up standards. The Government and the regulator have previously acknowledged that all parties involved in the corporate reporting ecosystem have a part to play in maintaining and strengthening the UK’s reputation as a trusted and leading place to do business.”
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The Accountant will update this story as more industry reactions are made public.