• Register
Return to: Home > News > Financial Results > UK’s FRC calls for greater powers

UK’s FRC calls for greater powers

The UK’s Financial Reporting Council (FRC) has requested more powers following the collapse of Carillion.

In a letter from the FRC’s CEO Stephen Haddrill to the select committees in charge of investigating the collapse of the Carillion, the accounting profession’s watchdog requested more powers to investigate the quality of the governance of companies. He said this would bring it more in line with fellow UK regulator, the Financial Conduct Authority.

Haddrill also addressed the limitations the FRC has in not being able to publish its views on individual company audits, due to the confidentiality requirements in the Companies Act: “We now intend to enhance our focus on the audits of companies which appear to be in danger and should like this to be combined with an ability to call out what we find.

“Companies will still fail. Not every impending failure can be stopped, especially through the backward-looking lens of audit. However, we do feel it would be valuable to investors if we could do more to signal concerns, if before problems become terminal.”

Hadrrill noted that the FRC lacks of ability to monitor the performance of leadership and the suitability of those being appointed to senior audit positions. While he said that firms have recently started to work with the regulator on a voluntary basis in regards to these matters he added: “We believe that in view of the systemic importance of the major firms and the variation in audit quality within each firm, a statutory basis for scrutiny and challenge of leadership roles in protecting the sustainability of the business and driving consistency in quality is especially important.

Alongside acknowledging the limitations of power which the FRC has, Haddrill also commented on the dominance of the Big Four: “The failure of a firm could have serious implications for confidence in the capital markets. It is also worth noting that at present the loss of an audit contract gives a firm an opportunity to pick up better remunerated consulting work.

“The market does not therefore fully incentivise high quality performance. We have a responsibility to monitor these risks but do not have powers to intervene. We have therefore raised the issue with the CMA who are considering the matter. Working with the CMA we will consider whether any of the audit regulations could be changed to reduce concentration in tandem with competition measures.”

Top Content

    Brazil: regulation and technology form basis for recovery

    Opportunities in the capital markets and the ever-growing influence of technology are expected to have a significant impact on the Brazilian accounting profession over the next 12 months, writes Paul Golden.

    read more

    Mentoring support and the opportunity to delegate

    Jon Lisby will be known to many from his former role as CEO of Kreston International. Here, he explains the background to his new venture, Global Alliance Advisory Services (GAAS), and how he aims to offer support to alliance CEOs.

    read more

    Global by name, global by nature

    Stephen Heathcote became chief executive officer of PrimeGlobal on 1 June 2019. Robin Amlôt met him to discuss the various new challenges that he has taken on, and his ambitions for the association.

    read more

    ARGA team, assemble!

    The new top team has been named that will see in root-and-branch reform at the Financial Reporting Council (FRC) as it transforms into the Audit, Reporting and Governance Authority (ARGA). Will the new duo be as dynamic as some are hoping? Robin Amlôt reports.

    read more

    CORONAVIRUS TIMELINE: REACTIONS FROM THE ACCOUNTANCY PROFESSION

    As the Coronavirus (COVID-19) continues to spread across the world, the International Accounting Bulletin and The Accountant will be collating all the latest news and updates from the profession on the pandemic’s impact.

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.