Death knell for FRC beckons in new dawn for audit and accounting
A new dawn is rising on the audit and accounting sector, after the final death knell sounded for the Financial Reporting Council.
A new, more powerful regulator called the Audit, Reporting and Governance Authority is set to be created to take its place.
The Government revealed yesterday afternoon that will axe the somewhat tarnished FRC, which had been accused of being too weak and lacking transparency.
The move was recommended by the recent Kingman Review. The new body will be an independent statutory regulator, accountable to Parliament.
The new regulator will have “a new mandate, new leadership and stronger statutory powers”, the Government indicated, as it began a consultation about the reforms.
Headline reforms for the new regulator:
- Will regulate the biggest audit firms directly (rather than those being delegated)
- New statutory powers to make direct changes to accounts rather than apply to court to do so, and more comprehensive, visible reviews for greater transparency
- Tougher penalties for 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
- Higher standards of statutory audit, corporate reporting and corporate governance
- Pledge to hold companies and professional advisors to account
- A new, diverse board and strong leadership to change the culture and rebuild respect
Could new regulator spark wave of new rules?
Some concerns have been raised already since the idea of the new regulator was first revealed a few months ago.
IRIS Chief Evangelist Steve Cox has asked whether the new watchdog might herald a tsunami of new rules and regulations, leading to more anguish for accountants, who have already faced much change lately, not least with MTD.
Some accountants have concerns regarding the fees that they may face to pay for the new regulator – not a welcome prospect, bearing in mind they’re already paying for their ACCA and ICAEW membership fees.
Greg Clark, Secretary of State for Business, Energy and Industrial Strategy, outlined yesterday why the Government believes the overhaul is necessary.
He 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. 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.”
Shake up continues
As the sun sets on the FRC, there will be plenty of speculation and questions on its successor and what further developments we’re set for in the coming weeks and months.
And this is only one half of the massive shake up in the sector, with The Competition and Markets Authority study about the Big Four auditing firms also continuing. A consultation is underway.
For accountants and auditors, it’s a new day, a new dawn, but at the end of it, will they be feeling good?