The Financial Reporting Council (FRC) has announced that it plans a fundamental review of the UK Corporate Governance Code (the Code). The review will take account of the findings of the FRC's corporate culture project (see our earlier article) and the issues raised in the government's recent Green Paper on corporate governance reform (for more information on this see here).
The FRC is planning to consult a large number of stakeholders and a consultation will follow later this year informed by those discussions and the government's response to the Green Paper.
The FRC press release can be found here.
Audit tenders FRC updates notes on best practice
The FRC produced best practice guidance in 2013 to help audit committees conduct a tender process following the 2012 change to the Code which added an obligation for FTSE 350 companies to put their external audit out to tender every 10 years on a comply or explain basis.
The FRC has now updated this guidance to reflect the changes that have been seen as companies have put their audit out to tender and best practice has started to develop. It also follows the EU Audit Regulation which came into effect in June 2016 and which requires Public Interest Companies (PIEs) to change their auditors after a maximum term of 10 years (which can be extended to 20 years). A PIE is an entity incorporated in an EU Member State with equity or debt listed on an EU regulated market, or a credit institution or insurance undertaking.
In updating the best practice notes the FRC has consulted widely with audit firms and companies who have recently been through the retendering process. The notes are designed to highlight how audit committees can get the best outcome from the retendering process.
The Investment Association (IA) (the trade body representing UK investment managers) also recently published guidelines on audit tenders, setting out the expectations of the IA's members when companies tender their audits. The guidelines are aimed at companies whose shares are admitted to the premium and standard segments of the Official List and those trading on AIM or the High Growth Segment of the Main Market.
The guidelines cover, among other things:
- how the audit should be planned by the audit committee
- what the audit committee should take into consideration when inviting a firm to tender
- the objectives and selection criteria for the tender process
- what should be considered when making the tender decision.
The guidelines can be found here.