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124 | Environmental and social transparency under the Companies Act 2006Annex 5: Regulatory implementation and compliance: the FRRP | 125confidentiality of communications) could be maintained in legal proceedings.(8) In this section “document” includes information recorded in any form.Where it appears to the FRRP that a company’s accounts or reports are ormay be non-compliant with the requirements of the Companies Act 2006,the FRRP has powers to require companies, officers, employees or auditorsof the company to produce any ‘documents’ (information recorded in anyform), or provide any information or explanations which it may reasonablyrequire, for the purposes of discovering whether there are grounds foran application to court in respect of defective reports, or deciding whetherto make such an application. It also has a right to apply to a court to securecompliance with any of these demands, if within the scope of the law. Anexception applies to information which could be classed as subject to legalprofessional privilege. 314s456 Application to court in respect of defective accounts or reports(1) An application may be made to the court—…(b)by a person authorised by the Secretary of State for the purposes of thissection,for a declaration (in Scotland, a declarator) that the annual accounts of a companydo not comply, or a directors’ report does not comply, with the requirements ofthis Act (or, where applicable, of Article 4 of the IAS Regulation) and for an orderrequiring the directors of the company to prepare revised accounts or a revisedreport.The FRRP is authorised to make an application to court for a declarationof a company’s non-compliance with legal reporting standards, and foran order requiring the directors of the company to revise the accounts orreports. In this situation the court has a range of powers to implementcompliance. See Annex 5.4.4 below for details of these powers.The FRRP also maintains a legal costs fund of £2million for the purposesof pursuing any of the above court orders and/or declarations. 315A.5.4 Procedures 316A.5.4.1Selection of accounts or reports for scrutinyThere are a number of ways in which the FRRP decides which companyaccounts or reports to examine:- Sectoral focus – The FRRP liaises with the FSA and its ‘Standing AdvisoryGroup’, to identify which sectors of the economy are under strainor likely to give rise to difficult issues, and it then chooses a numberof key sectors, reviewing a selection of accounts in each. 317 Its prioritysectors for 2008/09 are banking, retail, travel and leisure, commercialproperty and house builders. 318- Risk model – The FRRP is developing a risk model to identify specificcases where accounting problems are more likely (e.g. cases of poorcorporate governance).- Topical issues – The FRRP looks at ‘topical’ accounting issues. Forexample, in late 2008 it is applying close scrutiny to impairment 319 andliquidity 320 in reporting.- Complaints – The FRRP responds to complaints from the public, thepress and the City.- Public authority request – If requested by the Secretary of State forBIS, Treasury, Bank of England, FSA, or HM Revenue & Customs, theFRRP will normally be prepared to review a specific set of accountsand deliver its findings to the authority concerned, drawing attentionto any matters which the FRRP believes to be relevant to that authority’sregulatory function. 321Selection is based on the FRRP’s assessment of the risk of non-complianceand the risk of significant consequences if there is non-compliance. 322A.5.4.2Initial considerationReports are reviewed by FRRP staff, who draw up a recommendation forthe Chairman and Deputy Chairman, who then decide whether there is, ormay be, a question of non-compliance, and therefore whether to proceed.If the Chairmen are of the view that there may be a question of non-compliance,but require more information to decide whether there may havebeen a breach, they will write to the company Chairman (and, if appropriateFinance Director) to request documents, information or explanationin relation to their doubt. If necessary they may for this purpose use theirpowers under the Companies Act 2006, as detailed above.