The Financial Reporting Council has admitted in a letter to the Treasury Committee that it should have acted faster during its early enquiries in relation to the investigation of KPMG’s 2007 and 2008 audits of HBOS.
FRC chief executive Stephen Haddrill said in the letter that the FRC should have adopted a “more proactive approach” instead of relying heavily on other regulators which created a substantial gap in inquiries. “We were concerned that the limitations in our powers to secure information from companies meant it was sensible to await the conclusions of the financial services regulators (Financial Services Authority) which had full access to information,” he said.
Therefore, the FRC has asked the Treasury Committee chair Nicky Morgan for support to give the FRC more powers so that it will be easier to bring cases against accountancy firms. The FRC also stated that there should be legislation for accountants in public interest roles to have a similar threshold of accountability as auditors.
The FRC closed its investigation into KPMG’s audit of HBOS in September 2017 as there was no realistic prospect of a finding against KPMG. Hadrill said FRC now recognises that more information should be provided about the reasons for closing an investigation, where it is legal to do so.
The FRC also confirmed that it will conduct a review into its own governance.