Definition
The Financial Reporting Council (FRC) is a regulatory body in the United Kingdom established in 1990 following the recommendation of the Dearing Report. Its primary mission is to promote high-quality corporate governance and financial reporting. In 2012, the structure of the FRC was reformed into two main divisions: the Codes and Standards Division and the Conduct Division.
Examples
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Corporate Governance Code: The FRC maintains and promotes the UK Corporate Governance Code, which sets standards of good practice in relation to board leadership and effectiveness, remuneration, accountability, and relations with shareholders.
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Accounting Standards: Through the Accounting Standards Board (now part of the Codes & Standards Division), the FRC oversees the development and issuance of accounting standards that ensure transparency and accuracy in financial statements.
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Audit Profession Oversight: The Conduct Division of the FRC exercises oversight and monitors the auditing profession to ensure compliance with ethical standards and proper audit performance.
Frequently Asked Questions (FAQs)
What is the primary function of the Financial Reporting Council (FRC)?
The primary function of the FRC is to promote high-quality corporate governance and financial reporting, ensuring confidence in the quality of financial statements published by the UK’s listed companies.
How did the FRC come into existence?
The FRC was established in 1990 following recommendations from the Dearing Report, which called for improvements in the standards of corporate governance and financial reporting in the UK.
What are the two main divisions of the FRC after the 2012 reform?
- Codes and Standards Division: Advises the Accounting Council, Actuarial Council, and Audit Assurance Council.
- Conduct Division: Monitors, oversees, and disciplines the accounting, actuarial, and audit professions.
What role does the FRC play in corporate governance?
The FRC maintains and promotes the UK Corporate Governance Code, which provides principles of good corporate governance practices for UK listed companies.
How does the FRC oversee the accounting profession?
The FRC, through its Codes and Standards division, develops and issues accounting standards, and its Conduct division monitors the profession to ensure compliance with those standards.
What is the UK Corporate Governance Code?
The UK Corporate Governance Code is a set of principles published by the FRC that aims to ensure high standards of corporate governance among UK listed companies.
Who advises the FRC’s Codes and Standards Division?
The Codes and Standards Division is advised by the Accounting Council, the Actuarial Council, and the Audit and Assurance Council.
What was the purpose of the reform in 2012?
The 2012 reform aimed to ensure a more effective and transparent regulatory framework by dividing the FRC into two main functions—standards-setting and monitoring & enforcement.
How does the FRC contribute to financial reporting?
The FRC contributes to financial reporting by setting high-quality standards for financial reporting and auditing, and by ensuring these standards are adhered to through rigorous monitoring and oversight.
Where can more information about the FRC be found?
More information can be accessed on the FRC’s official website: FRC.
Related Terms
Corporate Governance
A system by which companies are directed and controlled, involving the board of directors, management, shareholders, and other stakeholders.
Accounting Standards Board (ASB)
One of the bodies under the FRC, responsible for developing and issuing standards for accounting and financial reporting.
Auditing Practices Board (APB)
Responsible for setting standards and providing guidance for auditing practices. It is now integrated into the Codes and Standards Division of the FRC.
Professional Oversight Board (POB)
A body that ensures the quality and independence of the accountancy profession, now part of the FRC.
Accountancy and Actuarial Discipline Board (AADB)
Addresses disciplinary matters for accountants and actuaries, functioning under the FRC’s Conduct Division.
Online References
Suggested Books for Further Studies
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“Corporate Governance: Principles, Policies, and Practices” by Robert A.G. Monks and Nell Minow
- An in-depth exploration of corporate governance principles and practices.
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“The Essentials of Finance and Accounting for Nonfinancial Managers” by Edward Fields
- A guide that demystifies accounting and financial report analysis for non-financial managers.
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“Financial Accounting and Reporting” by Barry Elliott and Jamie Elliott
- Comprehensive coverage of financial accounting and reporting topics including IFRS.
Accounting Basics: “Financial Reporting Council (FRC)” Fundamentals Quiz
Thank you for exploring the foundational aspects and operations of the Financial Reporting Council (FRC). Dive deeper into the specified resources and material for a comprehensive understanding of its pivotal role in the financial landscape.
