FTSE firms 'working on accountability'

A new report from Grant Thornton has suggested FTSE 350 firms are increasingly focused on corporate governance and accountability, perhaps thanks to the intense media pressure that has been placed on the business world in recent years.

Some 57 per cent of companies in this bracket now comply with the UK corporate governance code, up from circa 51 per cent over the last three years. While it should be hoped that this figure will increase further in the future, it nevertheless represents a degree of progress for the sector.

However, only 27 per cent of firms were able to offer any insight into how they review their systems of internal control, indicating that auditors may need to do more to ensure businesses manage risk effectively.

Simon Lowe, chairman of the Grant Thornton Governance Institute, said governance scandals and corporate disengagement have encouraged companies to reconsider their approach to these issues in recent years.

With regulators in the UK and Europe generating new governance infrastructure in a bid to avoid these issues it looks likely further cultural shifts will be needed if firms are to conform, he added.

"Perhaps we shouldn't be surprised given the heightened scrutiny of accounting judgements, auditor independence and executive remuneration over the past 12 months, not to mention the increasing drive for a more considered approach to board diversity and effectiveness," concluded Mr Lowe.

An increasing number of firms are turning to internal audit as a good way to manage risk, with only 27 respondents admitting to not having any kind of function along these lines.

These companies cite their small size and lack of complexity as reasons for not requiring any kind of internal process, Grant Thornton found.

Of those companies that do carry out internal audits, 24 per cent disclose either an outsourced or co-sourced internal audit arrangement, while the remaining 76 per cent carry it out in-house or else have not provided sufficient information to make the situation clear.