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An accounting and corporate governance watchdog is turning its attention to sectors that rely heavily on discretionary spending, with a particular focus on recruitment and IT companies. The Financial Reporting Review Panel says the sectors’ public and privately owned businesses have changed how they manage and record cash flow due to ongoing “economic pressures.” To ensure the changes made to the balance sheet are “appropriate,” scrutiny of the entire outfit’s accounting policies, particularly those for expenses, may be necessary, the panel warned. This approach to companies is likely to dominate the panel’s workload until 2011, mainly where it detects a heavy reliance on discretionary spend which might be stretched in the short-term. As a result, the panels’ ‘priority’ sectors this year and the next are advertising, media, commercial property, recruitment and IT. Firms which have made earnings-related changes to the books “to meet the challenges of the recession” will be inspected the most closely, explained Bill Knight, chairman of the panel, which polices compliance with the Companies Act. Where breaches of the act are discovered, the panel typically sees the organisation volunteer to comply, though it can get a court’s backing for an order to change the accounts, should offenders refuse. Mar 8, 2010 Email this article Printer friendly page Previous Page
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