Fines issued by the UK's Financial Reporting Council's (FRC) to audit firms increased by 44% year-on-year to £24.3m ($30.76m) for the year ended 30 September, according to research from Thomson Reuters. 

The FRC is currently in the process of transitioning into the new regulator – the Audit, Reporting and Governance Authority (ARGA) – which will have more powers, after a review was conducted by Legal and General group chairman John Kingman in order to see if the FRC was still fit for purpose.

Kingman proposed that the body should be replaced by ARGA, while further changes should be made during the transition to give the new regulator more power.

The FRC came under fire by politicians following the high profile collapse of UK construction company Carillion in January 2018 and was described as ‘chronically passive’. The FRC has been seen to increase its fines since then.

Some of the larger fines that the FRC levied in the wake of Carillion was a fine of £6.5m on PwC UK in regards to the work it conducted for collapsed retailer British Home Stores and a £4m fine imposed on KPMG UK in relation to the audit of The Co-operative Bank in May.

Despite the increase in fines, the size of them seems somewhat trivial in comparison to sanctions and fines levied in the US. In July 2018, a court ordered PwC US to pay $625.3m in damages due to failing to spot a fraud scheme which led to the collapse of the Alabama’s Colonial Bank.

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It is questionable how much of an impact that the FRC’s fines have on the likes of the Big Four, due to their sheer size. Last month, PwC UK, which included revenues from PwC Middle East, increased its revenue by 12% to £4.2bn for the year ended 30 June 2019. In comparison to this figure, £6.5m seems more like pocket change.

However, the increase in fines seems to signal the greater power that the FRC wishes to show as it transforms into ARGA.

An FRC spokesperson said: “The significant increase in the number, range and severity of sanctions sends a clear message that where behaviour falls short of what is required, we will hold those responsible to account.

“Improved behaviour by those we regulate requires recognition that where failures occur their root causes must be identified, effectively addressed and reported to us. Where such co-operation occurs due credit will be given; where it does not, consequences will be severe.”

Recently, a new leadership team took office; Simon Dingemans and Jon Thompson took the roles of chair and chief executive respectively.