Financial Accountability

1. 1
Financial
Accountability

2. 2
Companies are regulated by:
 Company Law
 Non Statutory Regulations
 International Accounting Standards
 Stock exchange regulations

3. 3
Company Law
 Ltd Company MUST publish accounts
annually for shareholders
 Must be in set format with required
disclosures
 1 copy of Accounts to be lodged with the
Registrar of Companies (ROC)
 Should show a “true and fair view”

4. 4
Non Statutory Regulations
 Financial Reporting Council (FRC) is an
independent regulator with a mission of
promoting confidence in corporate reporting
and governance in the United Kingdom
 FRC guides the standard setting process.

5. 5
Non Statutory Regulations
 Responsible for the issue of Financial
Reporting Standards.
 Lays down prescribed accounting treatments
in areas where a variety of approaches might
be taken

6. 6
FINANCIAL REPORTING COUNCIL
FRC
Accounting Standards Board
ASB
Public Sector Liaison Committee
PSLC
Urgent Issues Task Force
UITF
Financial Reporting Review
Panel (FRRP)
THE FRC FRAMEWORK
FEEDBACK

7. 7
FRRP
 Objective: look into companies (plc & large private
Ltd) whose financial statements DO NOT comply with
Accounting Standards.
 Action taken if non compliance is not justified in
providing a true and fair view
 : i) persuade co. to comply (discuss with auditors &
directors. Failing which get court order to have A/C
revised & cost of action borne by directors
personally.
ii) if non compliance reasons are valid; FRRP will
feedback to ASB to ask for corrective actions

8. 8
ASB
 Fulltime chairperson, consists of 9 members
 2/3 decision required
 Establishes sub-committee (for specific
relevant industries) to develop standards

9. 9
UITF
 Interprets existing standards i.e. conflicts arising from
interpretation of a particular standard.
 UITF abstract issued to enable company facing the problem
complete their accounts.
 The abstract is handed over to ASB to be incorporated into
existing standard/ create new standards.
 The abstract is merely a solution to the treatment of a peculiar
problem therefore doesn’t carry the same weighting as an
accounting standard

10. 10
PSLC
 Offer advise to ASB & considers ways of
minimising differences between public sector
and private sector Accounting practices.
 Works on advising public sector matters.

11. 11
International Accounting
Standards
 International Accounting Standards Committee
(IASC) attempts to co-ordinate the development of
international accounting standards.
 IAS is not intended to override local regulations.
 FRC supports international standards through
incorporating into UK standards

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Stock Exchange Regulations
 A company whose shares are traded in the market
(stock exchange) is known as a “quoted” or “listed”
company.
 Listed companies are committed to procedures and
standards and disclosure requirements which are
more extensive than the requirements of the
Companies Act.

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What is Corporate Governance?
 The system by which companies are directed
& controlled.
 It is a set of systems, policies, customs, laws
& people that effects how a company is
directed & controlled at board level.

14. 14
Why is Corporate Governance
important?
 To ensure that directors are accountable and
act in the best interest of the owners of the
company and not the directors’.
 As directors are vested with the stewardship
of the company, it is important to ensure that
they act in the best interest of the company.

15. 15
Directors
Responsible for:
 Stewardship of the company
 Formulate & set strategic aims
 Provide leadership, oversee management
 Reporting to shareholders & compliance to
law

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Shareholders
 Appoint directors to the board & auditors to
oversee them in order to “satisfy themselves
that an appropriate governance structure is in
place.

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Auditors
 Act independently of directors & shareholders
 To act as an objective checking system on
the processes & reporting systems, which
relate to the company’s financial statements

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Other regulations
 Auditing Regulations
 Tax regulations