On 18 November 2010 the FRC published a paper for audit committees, intended to influence their thinking and focus during the 2010/11 annual reporting season by posing questions prompted by FRC analysis of the current reporting environment. The paper covers many of the same areas as those covered in 2009, but the FRC has made amendments intended to, among other things:

  • Address the view that the focus of concern of the financial crisis has shifted from the banking sector to government deficits and companies that are dependent upon government spending. Many of the questions about liquidity risk and going concern in the 2009 paper have not been included, however committees are asked whether full consideration has been given to the challenges, if any, posed by the forecast significant reduction in government expenditure.
  • Improve the relevance and focus of disclosures about principal risks and uncertainties, elicit whether those risks and uncertainties have been fully evaluated and taken into account in preparing budgets and forecasts that support going concern and impairment assessments, and ensure that comments about future prospects in the front of annual reports are consistent with those budgets and forecasts.
  • Enhance the contribution of audit, eg questions have been added asking whether the committee has discussed the outcome of the prior year review of the effectiveness of the annual audit, and the business and financial risks, with the auditor and whether the audit strategy and plan addresses the issues and risks raised; whether management has exerted undue pressure on the level of audit fees; and whether arrangements been agreed with the auditor to ensure they express any concerns about estimates, assumptions and forecasts without undue influence by management.