UK accounting watchdog to be replaced by stronger regulator
The UK’s accountancy watchdog the Financial Reporting Council (FRC) is to be abolished and replaced with an independent statutory regulator as part of a shake-up of the scandal-hit industry.
Business Secretary Greg Clark announced the FRC will be replaced by the Audit, Reporting and Governance Authority and follows a Government-commissioned review led by Sir John Kingman.
Scrutiny of the big four accountancy firms KPMG, Deloitte, PwC and EY has intensified in recent months, fuelled by the failures of Carillion and BHS.
The government said it “shares the review’s vision for a new regulator with a new mandate, new leadership and stronger statutory powers”.
The new regulator will for the first time be a statutory body with powers such as those to make direct changes to accounts rather than apply to court to do so, and more comprehensive, visible reviews for greater transparency.
Its strategic direction and duties will be to protect the interests of customers and the public by setting high standards of statutory audit, corporate reporting and corporate governance, and by holding companies and professional advisors to account.
It will regulate the biggest audit firms directly, rather than those being delegated, and have “a new, diverse board”.
There will also be greater sanctions available in cases of corporate failure, including new powers to require rapid explanations from companies and in the most serious cases publish a report about the company’s conduct and management.
Clark said: “This new body will build on our status as a great place to do business and will form an important part of strengthened public trust in businesses and the regulations that govern them.
“I am most grateful to Sir John Kingman for his work in this area. Taken together with the CMA’s market study and Sir Donald Brydon’s review of audit quality and effectiveness, they will enable us to deliver a major set of reforms on the regulation of company audit, accounting and reporting.
“The UK has always been a world leader in audit and accounting services, with world-class frameworks for corporate reporting, corporate governance and regulatory oversight. Our modern Industrial Strategy sets out our vision to ensure that the UK is the best place to invest, start and grow a business. The creation of a new regulator will ensure that the UK maintains and advances its status as a place of the highest standards in audit.
“The government sees a tough and robust regulator, and an audit sector with the highest standards, as a key part of attracting investors, jobs and growth to the UK.”
