While the code will continue to apply on a “comply or explain” basis, FTSE-350 companies will need to put their external audit contracts out to tender at least every ten years, while audit committees are to give shareholders information on how they have fulfilled their responsibilities, including the way in which they have assessed the effectiveness of the external audit process.

Under the changes, boards must confirm that the annual report and accounts taken as a whole are “fair, balanced and understandable” and ensure that the narrative sections are consistent with the financial statements and accurately reflect the company’s performance.

Companies must also explain – and report on progress with – their policies on boardroom diversity. This change was first announced in October 2011, but its implementation was deferred to avoid piecemeal changes to the code.

Furthermore, companies must provide fuller explanations to shareholders as to why they have chosen not to follow any given provision of the code.

The FRC has also revised the stewardship code. It has introduced changes such as the need for investors to explain more clearly how they manage conflicts of interest, the circumstances under which they will take part in collective engagement and the use they make of proxy voting agencies.

Asset managers are also encouraged to have the processes that support their stewardship activities independently verified, to provide greater assurance to their clients.

The updated codes have applied since 1 October.

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