The top 350 companies listed on the London Stock Exchange are to feel the brunt of a financial regulator's new responsibility to hunt down accounting abuses.
Three companies could face investigations by the Financial Reporting Review Panel after it chose to scrutinise the annual reports of 20 listed companies.
Its work over the past two months covers 10 companies in the FTSE 100 share index, three in the FTSE 250, one in the FTSE SmallCap and six smaller listed companies. Several Irish firms are also listed on the indexes.
Accountants at the panel, which probes suspected accounting abuses by listed and big private companies, identified three corporates where they are likely to pursue significant issues of non-compliance with financial reporting rules.
The accountants also spotted some minor non-compliance by five other companies which could be remedied by warnings.
The panel will decide shortly whether to launch investigations into the three companies after subjecting its work on the 20 annual reports to peer review and getting responses from the corporates. The regulator has powers to force companies to correct their financial statements if it concludes that they have breached accounting rules.
The names of the companies have not been disclosed by the panel because it works confidentially and only comments publicly if it requires corporates to correct their accounts.
The panel chose the 20 annual reports on a subjective basis, but plans to use a process based on risk assessment from next year.
Ministers demanded that the panel adopt a proactive approach in January to try to guard against US-style accounting scandals in the UK. Until now the panel, established in 1990, had only conducted probes into accounts following complaints or media stories. Sir Bryan Nicholson, chairman of the Financial Reporting Council, the panel's independent parent body, said: "Having proactivity does not stop crooks. All it does is provide you with a stronger framework. People will always be able to get through it if they are crooked."
