Included in this issue: FRC - Consultation on changes to the UK Corporate Governance Code, Guidance and Standards | EU Market Abuse Regulation - Insider lists and notification of PDMR transactions templates | Deregulation Act 2015 – Notifications on auditor departure
FRC - Consultation on changes to the UK Corporate Governance Code, Guidance and Standards
In September, the Financial Reporting Council (FRC) launched a consultation on proposed revisions to its ethical and auditing standards and the UK Corporate Governance Code – click here. The proposed changes are designed primarily to implement provisions of the EU Audit Directive and Audit Regulation, but also reflect other recent changes, including revisions to the International Audit and Assurance Standards Board's auditor reporting standards and the new audit-related obligations of FTSE 350 companies under the Competition and Markets Authority's Statutory Audit Services Order. The FRC has also taken the opportunity to consult on changes to its Guidance on Audit Committees to align the guidance with the proposed Code and standard changes.
The proposed changes to the Code include the deletion of the recommendation that one member of the audit committee should have "recent and relevant financial experience", replacing it with a recommendation that such member has "competence in accounting and/or auditing", and that the audit committee as a whole has "competence relevant to the sector in which the company operates." It is also proposed to delete the recommendation that FTSE 350 companies should put their external audit contracts out for tender at least every ten years in the light of overlapping requirements in the CMA's Order and EU Audit Directive and Audit Regulation. A further proposal recommends that a company gives its shareholders advance notice of all future audit re-tendering plans. Finally, the consultation seeks views on whether an advisory vote on the audit committee report is required.
Proposed amendments to the FRC 's Guidance on Audit Committees include changes relevant to the composition of the audit committee covering sectoral competence, the removal of references to the audit re-tender recommendation, greater transparency around future audit re-tendering plans, guidance on the new rules around prohibition of non-audit services and consequential changes reflecting amendments to the FRC's ethical and auditing standards. The consultation is open until 11 December and it is expected that, subject to the responses, the finalised changes will apply to financial years beginning on or after 17 June 2016.
EU Market Abuse Regulation - Insider lists and notification of PDMR transactions templates
Following the publication at the end of September of the European Securities and Markets Authority's Final Report in respect of the draft technical standards on the EU Market Abuse Regulation, there is now much greater certainty around what information insider lists and notification of transactions by persons discharging managerial responsibility (and those of persons closely associated with them) will need to contain once the new regulation comes into force on 3 July 2016. For a summary of the changes to the contents requirements of the insider list and notifications templates, click here. The draft templates are now subject to the European Commission's approval.
Deregulation Act 2015 – Notifications on auditor departure
Provisions of the Deregulation Act 2015 have come into force simplifying the various notification requirements applying when an auditor ceases to hold office. The changes are designed to reduce unnecessary complexity and duplication which previously, in some cases, obliged both an auditor and the company subject of the audit to notify Companies House and the relevant audit authorities about the auditor's departure. Changes include a simplified procedure of auditor notification where the auditor of a non-main market listed company leaves office at the end of its term of appointment or where the circumstances of its departure are covered by an exemption. Exemptions, broadly, include that the company has become exempt from audit or that it is a subsidiary whose accounts are to be audited as part of group accounts. Changes have also been introduced to simplify the requirement for a company to notify the audit authority of its auditor ceasing to hold office where the auditor's departure is not of regulatory interest.