ICAS calls for clearer safeguards in FRC’s TCA policy
ICAS calls for clearer safeguards in FRC’s TCA policy

The Institute of Chartered Accountants of Scotland (ICAS) has urged the Financial Reporting Council (FRC) to provide clearer safeguards and risk disclosures in its proposed temporary amendment to the UK’s Third Country Auditor (TCA) policy.

The organisation detailed its position in a formal response to the FRC consultation, which was launched in February, following a request from the UK government.

The proposal would temporarily alter the TCA framework to make it easier for certain entities registered in China to list in London.

In its submission, ICAS said “we believe it is reasonable to allow the listing in London of the securities of eligible Chinese businesses.”

However, the body also stated that it is “not convinced that sufficient information and evidence has been included within the FRC’s proposals to address the information needs of investors and the potential risks of the proposed amendment.”

ICAS argued that any listings permitted under the revised policy must build in clearer protection for market participants.

It said any listing should carry clear warnings and protections so investors have enough information to judge whether anything could affect the reliability of the financial reporting.

The institute pointed out that Chinese auditing standards differ from International Standards on Auditing (UK) and said this divergence needed to be plainly set out.

It underlined the need to spell out for prospective investors the key differences, the associated risks and their possible effects, so they can make well‑informed assessments and decisions.

ICAS also suggested that regulators and government departments should take responsibility for explaining these technical issues if they expect broad engagement with the consultation.

ICAS said: “This is a specialist topic so if wider stakeholder views are expected on the proposals contained in this consultation paper, we believe that the onus is on the FRC, Financial Conduct Authority and Department of Business & Trade (DBT) to explain the differences, risks and impact for the UK market to help inform consultees and maximise informed responses.”

“We note that there may be reciprocal opportunities for the UK but we would like to see more information on this with an explanation of how it supports longer-term growth and evidence of the demand in the consultation paper.”

ICAS also requested further clarification from the Department for Business & Trade on how the proposals align with government economic objectives.

“We are not fully persuaded why a temporary amendment is needed and question if this is being rushed through without appropriate due process.

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