Finance directors told to up their standards of reporting

Accounts watchdog says too many FDs overly optimistic in company reports

Finance directors have been told to up their game in key elements of corporate governance and reporting, after a review found a multitude of basic errors in reports.

In an open letter to finance directors, the Financial Reporting Council (FRC), the watchdog and regulator which aims to improve transparency in business, says that many companies misapply the UK corporate governance code.

Based on a review of 220 annual and interim reports, the FRC found that many companies give an unbalanced depiction of their performance – with some showing a tendency “to rely on overly optimistic judgments – amid continued weaknesses in companies reporting on the basic health of their accounts.

The FRC made the findings as part of its Development in Corporate Governance and Reporting review, published on October 24.

Paul George, executive director of corporate governance & reporting at the FRC, said: “A lack of transparency in financial and governance reporting, undermines trust in business. More accurate reporting and better governance practices are needed to reverse this trend.

“The UK faces challenges with corporate reporting after EU Exit. Companies should therefore do more to meet the expectations of the market and society in order for the UK to maintain its position as an attractive home for global capital.”

That said, reported compliance with the code is high with 95 per cent of FTSE 350 companies reporting that they comply with all but one or two of the 55 provisions.