As the November deadline approaches for compliance with the UK Combined Code on Corporate Governance, there is a clear division between companies who are going out of their way to reassure investors and those that are making little effort at all.
According to a report from Independent Audit Limited, many audit committees have made a substantial effort to report more informatively and explain how they are complying with the Code, despite this only being a transitional year.
The survey of the annual reports of 85 of the FTSE 100 companies found that 48% of audit committees reported that they had completed an annual evaluation of their own effectiveness, 30% reported completing a review of the external audit process and 26% reported completing a review of internal auditing ? all encouraging figures for the Financial Reporting Council.
However, many of the same companies that failed to complete any of these evaluations were also part of the 40% that fail to state that their audit committee has at least one member with ?recent and relevant financial experience?, or the 40% that fail to make their audit committees terms of reference available on their company?s website ? both much more basic requirements.
Although Independent Audit says it does not doubt that when compliance becomes compulsory from November 1 the quality of disclosure will improve, the complete lack of compliance from some companies is cause for concern.
The Financial Reporting Council?s Combined Code on Corporate Governance incorporates the findings of the Smith Report on Audit Committees and is compulsory for all reporting years finishing on or after November 1 2004. Independent Audit?s survey analyses FTSE 100 reports filed between November 2003 and July 2004, a transitory period for the Code.
A copy of the survey can be obtained by emailing Jonathan Hayward at jonathan.hayward@independentaudit.com
