Inconsistency between company accounts prompted the accountancy profession to introduce standardised procedures known as Accounting Standards. (Black 2002). Today, Accounting Standards are known as Financial Reporting Standards or (FRSs). Standards issued by previous bodies were known as Statements of Standard Accounting Practice or (SSAPs). These are still in use and are in constant review by the Accounting Standards Board (ASB), some have been withdrawn and others superseded by FRSs
According to (Black 2002) it is a legal requirement that the financial reports provide a 'true and fair view' of the transactions made by the Company during the course of a year. Accounting Standards outline the specific procedures required to produce consistent and functional reports. Their purpose is also to improve the quality and the usefulness of the financial statements. The FRC provides a general policy function and oversees the accounting standard setting, giving guidance and support to the Accounting Standards Board in developing financial information in the correct manner and advising on broad policy issues.
From its outset in 1990, the ASB has been responsible for issuing accounting standards, recognised under the Companies Act 1985 The aims of the ASB are to provide a lawful framework for financial accounts through the setting of standards, the focus being to work on the concept of principles rather than detailed rules. The ASB have developed a 'Statement of Principals for Financial Reporting' in order to define specific and consistent accounting standards.
The FRRP is an independent body which investigates discrepancies or deviations from the accounting requirements of the Companies Act 1985, which requires the Company to give an explanation of a deviation and the reason why. If a failure is identified, (Blake 1987), the panel try to come to an agreement to revise the documentation. This pertains only to large Companies, where the panel will ask the Company concerned to explain and give the reasons why.
If the panel does not accept its explanation, (Black 2002) then it has the power to apply for a court order and the company must then issue amended reports which must then reflect a true and fair view. This is all at the personal expense of the director(s) of the Company and could potentially be quite harmful. A sub- committee of the ASB who bring issues to light that may not be covered by an Accounting Standard, eg. It may be a new issue or may not be relevant or applicable. Its role is also to identify where a contentious issue has arisen over an accounting standard.
Its aim is to assist the ASB, (Black 2002) in the formulation and continuity of appropriate standards and correct reporting procedures. The ASB gives the UITF, (Black 2002) ultimate responsibility to reach an agreement on a particular issue and will generally not challenge the outcome. These are committees who work with specific industries and sectors, reviewing Statements of Recommended Practices (SORPs). SORPs are guidelines that are relevant to a particular industry and although are not accounting standards in their own right, they work on the basis of best practice.