The Financial Reporting Council issued a press release on Monday. It said:

Recent months have seen dramatic liquidity challenges for financial institutions and there are indications that these conditions are affecting the availability of credit to companies more generally. Financial reporting issues are now coming to the fore because a substantial number of UK listed companies have financial years ending in December.

The Financial Reporting Council (FRC) believes that recent credit market conditions mean that the risks to confidence in corporate reporting and governance are higher than they have been for some years. The FRC believes that these increased risks require additional diligence on the part of preparers of accounts, members of audit committees and auditors this year.

As a result it issued a list of key questions for audit committees. These are worrying.

Firstly they are extraordinarily basic. If committees have not been asking these questions, as is implied, then what have they been doing?

Second. take these questions on the relationship with auditors:

Have the auditors provided any ad hoc services or advice which could compromise their independence and objectivity in light of current market circumstances?

Anyone thinking of PWC and its involvement with Northern Rock's securitisation by any chance?

Third, they provide clear evidence that the FRC is reacting after the horse has bolted. Take these questions on securitisation:

Has management adequately identified and re-assessed the risk profile of securitisation structures and products?

Have all potential exposures and areas of losses been identified and assessed?

Has any action been taken either to fund structured investment vehicles (SIVs) or to liquidate them?

Has a sufficiently robust process been adopted to identify those SIVs that may need to be brought on balance sheet?

Have appropriate disclosures been made in accordance with relevant accounting standards?

What further explanations, in addition to those required by standards, may be needed in the annual report to provide transparency in relation to off-balance sheet arrangements?

Is there sufficient substantiation of the assumptions underlying any valuation techniques applied and models used?

It so happened I met with Sir Christopher Hogg and other FRC representatives in a meeting at the House of Commons on Monday afternoon. I admit our questioning was robust. Mine was direct. Why, I asked, was it ever considered appropriate to allow a company to set up an abusive structure such as that used by Northern Rock where it was suggested that a shadow entity was owned by a charitable trust that knew nothing of the arrangement for the purpose of hiding the true nature of the company's liabilities?

Sir Christopher had no answer.

I can suggest a reason. No plausible answer can be given that would satisfy the reasonable person.

(And before you shout - I do know Granite was on balance sheet - but it remained abusive).