The Chartered Institute of Internal Auditors
(IIA) has welcomed an FRC proposal to focus narrative reporting on
“Investors are concerned that the reporting of
risk in companies can be superficial and the FRC have highlighted
that the problem is not a lack of information but a lack of
properly focussed information,” IIA policy director Jackie Cain
The institute stressed that more work will
need to be done to ensure that audit committees are equipped to
take on the additional responsibility for reporting
Cain said recent IIA research suggests some audit committees
understanding of the risks facing their company is not as firm as
it should be.
“If they are to take on additional
responsibilities for risk reporting, they will need additional
support as well as clear guidelines,” Cain said.
The FRC proposed current company narrative
reports should focus primarily on strategic and major operational
risks rather than indiscriminately listing risks that all companies
To achieve this, the FRC will update the
Turnbull Guidance, which sets out best practice on internal control
for UK listed companies and assists them in applying sections of
the UK Corporate Governance Code. The regulator will also
consider whether changes need to be made to the code.