FRC calls for greater powers to discipline audit firms
The UK's corporate governance regulator is calling for greater powers to sanction and discipline audit firms that are not up to snuff, even as it becomes 100% reliant on commercial fees following the withdrawal of public funding.
In a submission to a House of Lords inquiry, the Financial Reporting Council (FRC) said that it wants a "wider range of sanctions to address shortcomings in audit quality". It also believes that it should be responsible for "the licensing of auditors of public interest entities – a task that should be undertaken in addition to the general licensing of auditors within the profession itself".
Today, the FRC only has the power to investigate cases that are in the public domain or that are referred on to it by professional accounting bodies. It is these bodies that currently have the power to hold hearings, de-register and ban either individuals or firms from undertaking audits if they are not up-to-scratch.
The FRC's disciplinary arm, the Accountancy and Actuarial Discipline Board, has so far failed to build the necessary consensus among such bodies to allow it to undertake its own independent probes, however.
Meanwhile, in a move that may affect its hopes in this area, the FRC is to have its public funding withdrawn, making it entirely reliant on financing from market players as part of the coalition government's so-called 'bonfire of the quangos'.
Stephen Haddrill, the body's chief executive, said of the move: "The FRC is committed to the principles of accountability, transparency and value for money identified by the government in the public bodies review. We believe today's decision will help to reinforce the FRC's independence as a regulator, undertaking our functions in a politically impartial way in the public interest."
Over the last two years, its reliance on funding from the Department of Business, Innovation and Skills had dropped to only 5%, he added.