PDF file: Annual Report 2002/2003 - Scottish Crop Research Institute

Director’s Report
notes, bulletins, and consultative papers. The peculiarities
of the public sector are considered by the
APB’s Public Sector Sub-Committee as well as by the
Public Audit Forum, established in 1998 by the four
UK audit agencies (National Audit Office, the
Northern Ireland Audit Office, the Audit
Commission, and the Accounts Commission for
Scotland). In Scotland, audits in the public sector are
overseen by the Accounts Commission for Scotland,
the Auditor General for Scotland, and Audit Scotland.
Consistency in auditing practices and related services
worldwide is driven by an IFAC Committee – the
International Auditing and Assurance Standards
Board (IAASB), and is the main body for the issuance
of international standards on auditing (ISAs) and
international auditing practice statements (IAPSs).
National or government audit offices of over 170
countries belonging to the UN have come together to
form the International Organisation of Supreme
Audit Institutions (INTOSAs), founded in 1953, and
having a conceptual framework in The Lima
Declaration of Guidelines on Auditing Precepts. For the
UK, the National Audit Office is a member of INTO-
SAI. At this juncture, INTOSAI auditing standards
do not have mandatory application. In the UK, the
nature and scope of audit throughout the public sector
varies in the way in which the substantive topics
are dealt with, viz. financial statements, value for
money, regularity and legality, internal controls, proper
conduct including quality and extent of corporate
governance, performance indicators, and financial
standing. Much hinges on the auditor’s opinion and
the ‘true and fair’ argument. Unfortunately, there is
no universally accepted definition of the term ‘true
and fair’ despite the fact that in the UK the requirement
that all financial statements should “give a ‘true
and fair’ view” was first introduced in the Companies
Act 1947, and subsequently incorporated into the EC
4 th Company Law Directive, and the first statutory
recognition of accounting standards was in the
Companies Act 1989. The IASB Framework for the
Pr4eparation of Financial Statements uses the phrases
‘true and fair view’ and ‘fair presentation’ as one and
the same, but does not analyse these concepts.
Clearly, a consensus view will be needed before WGA
can become universal, and proper reassurance of
accounts and auditing standards will underpin the
capital markets.
Corporate Governance Based on the Review of the
Rôle and Effectiveness of Non-Executive Directors (the
Higgs Report published in January 2003), and the
review on Audit committees: Combined Code Guidance
(the Smith Report published in January 2003), the
Combined Code on Corporate Governance was issued by
the Financial Services Agency in July 2003, replacing
the Combined Code issued in June 1998 by the
Hampel Committee on Corporate Governance. It
was intended that the new Code will apply for reporting
years beginning on or after 1 November 2003.
The Code’s principles and provisions are to be complied
with unless a considered explanation is formally
given to justify any departure from its specific provisions
e.g. disproportionately onerous largely irrelevant
provisions relating to smaller, listed companies.
Guidance is given on how to comply with specific
parts of the Code, relating not only to the Smith
Report but also to Internal Control: Guidance for
Directors on the Combined Code produced in
September 1999 by the Turnbull Committee for the
Institute of Chartered Accountants in England and
Wales. Supplementing the new Code are The
Directors’ Remuneration Report Regulations 2002, S. I.
no. 1986. Of particular relevance to both publicand
private-sector organisations are the main principles
enunciated in the Code of Best Practice in the
Code. These are as follows. (a) Every company
should be headed by an effective board, which is collectively
responsible for the success of the company.
(b) There should be a clear division of responsibilities
at the head of the company between the running of
the board and the executive responsibility for the running
of the company’s business. No one individual
should have unfettered powers of decision. (c) The
board should include a balance of executive and nonexecutive
directors (and, in particular, independent
non-executive directors) such that no individual or
small group of individuals can dominate the board’s
decision-making. (d) There should be a formal, rigorous,
and transparent procedure for the appointment
of new directors to the board. (e) The board should
be supplied in a timely manner with information in a
form and of a quality appropriate to enable it to discharge
its duties. All directors should receive induction
on joining the board and should regularly update
and refresh their skills and knowledge. (f) The board
should undertake a formal and rigorous annual evaluation
of its own performance and that of its committees
and individual directors. (g) All directors should
be submitted for re-election at regular intervals, subject
to continued satisfactory performance. The board
should ensure planned and progressive refreshing of
the board. (h) Levels of remuneration should be sufficient
to attract, retain and motivate directors of the
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