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.”