LONDON, April 14 (Reuters) - Britain’s auditing watchdog wants the right to “name and shame” when it asks a company to make changes to its accounts - a relatively rare request and one that can embarrass the company and its accountants.
The proposal put out on Monday to public consultation by the Financial Reporting Council (FRC) is part of wider efforts to ensure markets are fully informed if the watchdog is unhappy with aspects of financial statements or company auditors.
Companies can choose now whether to disclose any amendments ordered by the FRC, as aerospace engine maker Rolls-Royce did in February when it had to restate its 2012 figures and adjust results for 2013.
Depending on the gravity of the FRC’s enquiry, companies may be forced in future to disclose the intervention publicly.
The explanation for failing to meet accounting rules would also have to be fair and balanced, and the watchdog would need to be given an opportunity to comment, the FRC proposal says.
It would also require a company to tell shareholders if the watchdog had raised issues not connected with mandatory rules, such as being asked to cut back on meaningless clutter in statements that give investors little hard information.
The FRC’s conduct division reviews about 300 sets of company accounts a year, with far fewer asked for an explanation and the number of required restatements in single figures each year. (Reporting by Huw Jones; Editing by Louise Ireland)