Select Committee on Treasury Minutes of Evidence


Examination of Witness (Questions 320-326)

MS MARY KEEGAN

TUESDAY 2 JULY 2002

  320. What happens if there are no international standards by 2005? In your opinion what are the implications?

  (Ms Keegan) There is a risk, there must be a risk, that those international accounting standards which were inherited by the IASB from its predecessor body will not be of the quality of UK financial reporting by the time 2005 arrives. We at the ASB have as our number one priority though to work with IASB to try to minimise that risk and to make sure that the financial reporting solutions for UK companies come 2005 will be every bit as strong if not stronger because there will be things like revenue recognition standards by 2005.

Mr Cousins

  321. Has there been communication between the Government and yourselves over issues such as revenue recognition and FRS 17?
  (Ms Keegan) I ought to explain the fact that at every board meeting of the ASB I have two observers: one from HM Treasury and one from the DTI. That means there is very regular communication on what we are doing and where relevant I can receive encouragement to move faster in one area or another. I also work at regular communication with the FSA in their role as market regulator. Therefore we exchange views on which topics demand urgency and which need priority.

  322. Do the minutes of your Board make it clear what the nature of either the encouragement or the discouragement from the Treasury representative to you is?
  (Ms Keegan) )Yes, the minutes of the Board record the decisions made at the Board as to what our priorities should be.

  323. I think the answer is in fact not yes, but no. Your minutes do not record encouragement or discouragement from the Treasury representative to you in your work. Do they or do they not?
  (Ms Keegan) No, they do not.

Chairman

  324. What message, what reassurance can you give to the general public on the accountancy profession in the light of Enron or WorldCom and the implications for the UK, given that a number of eminent professional accountants have stated to us that the profession is in crisis? What is your message?
  (Ms Keegan) A general message is: yes, there is a need to re-examine the role of every party in the whole process of providing good information to the markets. I would not necessarily place any more emphasis on the accounting profession, the auditing profession, than I would on the role of management, the role of corporate governance and no less on the work of the standard setters whose job it is to make sure that the guidance is there to get transparent financial reporting into the marketplace.

  325. Do you have any advice to give on corporate governance?
  (Ms Keegan) On a personal basis I have always felt very strongly about the importance of the role of the audit committee, of emphasising that role and providing guidance for business and for the audit firms, of the issues which should be brought in front of the audit committee and how those should be dealt with. I think that guidance should almost certainly include very careful scrutiny of the accounting policies adopted by the company and views from the auditor as to the prudence of otherwise of particular accounting policies; potentially also views from the auditor on any accounting decisions which have had to be made outside current accounting standards where perhaps guidance has not dealt with the particular situation the company has encountered. If there were guidance for audit committees in looking at those things and asking difficult questions of the auditors, the process of internal control within the company might be a little more transparent.

  326. May I thank you very much for coming along this morning? It has been very valuable to us and we wish you well. We look forward to international accounting standards being very comprehensive by 2005. We shall invite you back then.
  (Ms Keegan) We shall do our best.

  Chairman: Thank you.





 
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