More high-profile corporate collapses in the U.K. have led the Financial Reporting Council (FRC) to enact more stringent accounting standards, The Guardian reported on Monday (Sept. 30).
According to reports, the FRC issued an updated going concern standard, adding "significantly stronger requirements" for U.K. auditors than are currently mandated under international standards. The FTC has also reportedly been in communication with its counterparts in Australia, Canada and Japan to support the revisions.
Updated standards include requirements for auditors to elevate their scrutiny over clients' management teams, a new reporting requirement for auditors to clearly establish a conclusion on whether large public and private companies' management teams appropriately assess going concern, and a requirement for auditors to consider all evidence obtained when drawing that conclusion.
The elevated requirements follow last week's collapse of Thomas Cook, the world’s oldest travel management company. The FRC is currently reviewing whether it will launch an investigation into the company's failure, reports said, which could culminate in fines issued by the FRC's enforcement division.
In a statement, the FRC's Chief Executive Stephen Haddrill said, "High-quality audit protects the public interest, meets the needs of users of financial statements and underpins investor confidence. Recent corporate failures have, for good reason, adversely affected that confidence."
"Our own enforcement work has demonstrated a need to strengthen existing going concern standards, which is a fundamental aspect of audit, so that investors can have confidence in audited financial statements and businesses' financial prospects," he continued.
Reports noted that Haddrill will step down from the position at the end of this month following a surge in criticism of the FRC after other high-profile corporate collapses, including those of Carillion and Patisserie Valerie.
That criticism has led to an independent review of the FRC being conducted by Legal & General Group Chairman Sir John Kingman. Previously, a committee of MPs slammed the FRC as "chronically passive." The most recent collapse of Thomas Cooke elevated those criticisms.