The Financial Reporting Council (FRC) is an independent UK regulator responsible for promoting quality corporate governance and reporting, and for the oversight of the accounting and actuarial professions. It is currently an amalgamation of several organisations consisting of seven different bodies namely:
– Accounting Standards Board
– Auditing Practices Board
– Board for Actuarial Standards
– Professional Oversight Board
– Financial Reporting Review Panel
– Accountancy and Actuarial Discipline Board
– Audit Inspection Unit
This overly complex structure regulating various professions has rendered the whole process of regulation over-burdensome, insufficiently independent from the professional accountancy bodies and has equipped it with powers disproportionate in some cases.
Against this background a consultation is on to overhaul the FRC. The underlying aim is to:
a) Better focus the FRC’s activities:
Setting or promulgating standards in the interests of investors in the corporate sector with its primary focus, in relation to monitoring and enforcement, being on publicly-traded and the largest private companies, and
Narrowing the scope of the FRC’s accountancy disciplinary arrangements to cover the quality of work and conduct of accountants in relation to the preparation and audit of annual reports and other reports for the capital markets.
b) b) Create a streamlined governance and structure
Delegating statutory powers direct to the FRC Board, and not to its individual operating bodies as at present, and
Changing the FRC Board structure to be supported by two Board Committees – one to focus on Codes and Standards, the other on Conduct replacing the existing seven operating bodies.
c) Reinforce its independence from those it regulates.
With the power to determine and require a Recognised Supervisory Body to impose proportionate sanctions on an audit firm and/or individual auditor in respect of poor quality work, and
With the ability to make its own rules for the independent disciplinary arrangements which it operates in relation to accountants without being required to obtain the agreement of the accountancy professional bodies
d) Proportionate regulation
With enforcement powers to take more proportionate, nuanced action against a Recognised Supervisory or Qualifying Body, and
With the ability to take disciplinary action against individuals or firms without the need for a full tribunal hearing provided that this would not be contrary to the public interest and the parties agree; and to be able to undertake supervisory inquiries at its own initiative into significant matters of concern
The consultation closes for public response on 10 January 2012.
