UK’s accounting regulator, the Financial Reporting Council (FRC), will monitor whether auditors are making spot checks on their compliance with environmental, social, and governance (ESG) reporting requirements in company audits, as reported by Reuters on January 30. On the same day, the FRC updated its ESG Statement of Intent, which was initially issued in 2021 to address issues with the production, audit and assurance, distribution, consumption, supervision, and regulation of ESG information. The FRC mentioned in the updated statement that in 2023 it will focus on ESG data usage and the link between investors and ESG reporting by companies.
The updated ESG Statement of Intent continued FRC’s efforts to drive best practices in high-quality and comparable ESG reporting and disclosure. In 2022, the watchdog reviewed the audit team’s consideration of climate change in their risk assessment procedures, and incorporated in the listed companies’ reports and accounts the Task Force on Climate-Related Financial Disclosures (TCFD) disclosures and the impact of climate on the financial statements.
In 2023, the FRC will develop guidance and best practices on the distribution and consumption of ESG data and examine companies’ materiality processes to figure out ways to help companies provide stakeholders with relevant and decision-useful information. Moreover, it plans this year to revise the UK Corporate Governance Code to recognize the growing importance of ESG reporting in the work of company boards.