ACI technical updates & hot topics | KPMG | QM

ACI technical updates & hot topics

ACI technical updates & hot topics

Timely updates for audit committee members on changes in governance practices and requirements, as well as financial accounting updates and insights on the latest hot topics

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Dividend disclosures - still room for improvement in the FTSE 350

The Financial Reporting Council's ('FRC') financial reporting lab has conducted a study of the annual reports pubished in 2016 from 313 companies that were in the FTSE 350 as at 31 December 2015. 

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1 January 2018 deadline - Key Information Documents for Non-EU PRIIPs sold to EU retail investors

Non-EU listed closed-ended and authorised open/closed-ended funds sold to EU retail investors are in scope.

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FRC delays updates to FRS 102

The Financial Reporting Council ('FRC') have today announced that after consultation they will delay proposing changes to Financial Reporting Standard 102 ('FRS 102').

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FRC Lab publishes framework for future digital reporting

The Financial Reporting Council (‘FRC’) have released a framework as the first in a series of reports on future digital reporting.

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FRC to publish the names of companies subject to Corporate Reporting Review

The FRC will now publish the names of companies whose reports and accounts have been subject to Corporate Reporting Review.

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FRC announces review of the UK Corporate Governance Code

The Financial Reporting Council (‘FRC’) have announced a fundamental review of the UK Corporate Governance Code. 

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Business model reporting - Room for improvement

UK reports tend to emphasise a short-term view of performance at the
expense of the longer-term.

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FRC report on developments in corporate governance and stewardship

The Financial Reporting Council (‘FRC’) have released the annual report for 2016 on developments in corporate governance and stewardship. Further update to the corporate governence is expected in 2017.

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FRC Thematic Reviews for 2017

The Financial Reporting Council (‘FRC’) have announced in their recent press release the thematic reviews they will undertake in 2017/8. In particular these focus on the FRC’s aim to enhance the quality of Corporate Reporting, covering:

  • Significant accounting judgements and sources of estimation uncertainty
  • Pension disclosures
  • Alternative Preformance Measures

In particular, for reports published in 3017, the FRC will focus on:

  • The impact of new IFRSs; including timeliness and usefulness of the information provided
  • Principle risks and uncertainties relating to Brexit and the low interest rate environment and the extent to which they are company specific. Read more

These reviews are building on the recent FRC findings published in its Annual Review of Corporate Reporting and its Thematic Review of Alternative Performance Measures.

2017 Global Audit Committee Pulse Survey

KPMG’s survey of more than 800 audit committee members worldwide offers insights that audit committees around the globe can use to sharpen their focus, benchmark responsibilities and practices, and strengthen oversight. 

Read: 2017 Global Audit Committee Pulse Survey

Presenting performance: The journey to greater clarity

From adjusted EBIT, to like-for-like sales, non-GAAP alternative performance measures (APMs) can provide valuable information on a company’s performance. This year, new requirements put the focus on transparency of APM reporting. A KPMG survey of half-yearly reports suggests companies are responding – there is a direction of travel – but the Financial Reporting Council (FRC) has highlighted concerns that, for some companies, there may still be a way to go on this journey.

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On the 2017 board agenda

In 2017, corporate growth and shareholder return will still require the essentials - managing key risks, innovating and capitalising on new opportunities, and executing on strategy. But the context for corporate performance is changing quickly - and perhaps profoundly -as advances in technology, business model disruption, heightened expectations of investors and other stakeholders, and global volatility and political shifts force companies and their boards to rethink what it will take to stay competitive in the long term, and what it means to be a corporate leader. 

Drawing on insights from our recent ACI pulse surveys and interactions with directors and business leaders over the past 12 months, we have highlighted seven items that, in our opinion, boards should keep in mind as they help guide the company forward in the year ahead.

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On the 2017 audit committee agenda

Financial reporting, compliance, and the risk and internal control environment will continue to be put to the test in 2017 - by slow growth and economic and geopolitical uncertainty, technology advances and business model disruption, cyber risk, greater regulatory scrutiny and investor demands for transparency, and more. Focused, yet flexible agendas, exercising judgment about what does and does not belong on the committee’s agenda, and when to take deep dives, will be critical.

Drawing on insights from our recent ACI pulse survey work and interactions with audit committees and business leaders over the past 12 months, we have highlighted seven items that, in our opinion, audit committees should keep in mind as they consider and carry out their 2017 agendas.

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Statutory report on the audit tender process

Making the recommendation to the board on the appointment, reappointment and removal of the statutory auditor has for many years been a fundamental audit committee responsibility. Nevertheless, the recent audit reforms introduce a number of legally binding requirements in relation to audit tendering and rotation that for some Public Interest Entity (PIE) audit committees will represent a significant change to their role.

Brexit: Financial reporting implications

As businesses develop their responses to the outcome of the UK referendum on continued EU membership, the business-as-usual of preparing financial reports and auditing continues. As the FRC highlight in their recent press release, there are some immediate accounting and reporting implications to consider when preparing half-yearly and annual financial reports.

Our briefing provides an overview of some key considerations.

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The audit report journey

Audit reports continue to evolve. The pace and extent of future change are important issues and the views of audit committee members are very relevant to that debate. This report puts forward the case for audit committees to consider, and engage with shareholders, about where they should be on the spectrum ranging from meeting the minimum requirements of auditing standards, through to the inclusion in the audit report of graduated findings and detailed audit risk maps.

Audit tendering: the new normal

Four observations about the current audit tendering environment

While the EU Audit Reforms requiring regular audit tendering and rotation only came into effect recently, for many organisations this was already ‘business as usual’. In this paper, we set out four statistics to illustrate the size of the challenge, the progress to date and the impact on audit market share within the FTSE350.

Disruption

Putting the audit committee on high alert

Disruption can affect audit committees in different ways. In some cases - for example, cyber security - audit committees may need to become more knowledgeable and more vigilant in their oversight due to the rapid, ongoing evolution of the field. In other areas, such as oversight of reporting and compliance, it is their own approaches and processes that are changing, as complex standards up the regulatory ante. 

In the three short documents we look at some of the issues arising from disruptive trends in technology, geopolitics and regulation.

Audit reform

With the implementation date for audit reform fast approaching, we now have more clarity around audit tendering, mandatory firm rotation, the prohibition of many non-audit services and the non-audit services cap. The role of the audit committee however has received little attention. Nevertheless, they have a key role to play if the audit reforms are to be a success; and the new regulations include some new requirements that are difficult to navigate and in some cases will significantly impact the way audit committees of Public Interest Entities (PIE) operate in practice.

Our report looks at the impact of the new regulations across the following areas:

  • Audit committee composition
  • Auditor selection
  • Auditor independence and non-audit services

Read the full report 

Audit Reform – Credit institutions & insurance undertakings

For many unlisted credit institutions and insurance undertakings, the forthcoming changes to the Prudential Regulation Authority’s (PRA’s) Rulebook will require an audit committee for the first time. The new rules, which are broadly consistent with the familiar Disclosure and Transparency Rules (DTR 7.1) and provisions of the UK Corporate Governance Code, will also apply to listed credit institutions and insurance undertakings.

Viability statements: December 2015 year ends

From a review of eighteen FTSE350 companies who have published their December 2015 annual reports, we share three key observations about 'viability statements'.

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Viability statements: Five things we have learned

Following a review of the first fifteen FTSE350 companies to publish their September 2015 annual reports, our briefing document identifies five things we have learned about ‘viability statements’.

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© 2017 KPMG Channel Islands Limited, a Jersey company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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