The Secretary of State for Business, Energy and Industrial Strategy (BEIS) Greg Clark MP announced a new enhanced regulator to transform the audit and accounting sector in response to a comprehensive Independent Review of the Financial Reporting Council (FRC) led by Sir John Kingman, the chairman of Legal & General.
Greg Clark said, “this new body will build on our status as a great place to do business and will form an important part of strengthened public trust in businesses and the regulations that govern them.”
As per the review’s recommendations, the FRC will be replaced with a new regulator to be called the Audit, Reporting and Governance Authority.
The new regulator will have a new mandate, new leadership and stronger powers set down in law with recruitment for a new Chair and Deputy Chair launching immediately.
The new regulator will for the first time:
- be a statutory body with powers such as those to make direct changes to accounts and more comprehensive, visible reviews for greater transparency
- have strategic direction and duties to protect the interests of customers and the public by setting high standards of statutory audit, corporate reporting and corporate governance
- regulate the biggest audit firms directly
- have a new, diverse board and strong leadership to change the culture and rebuild respect of those it regulates
An initial consultation on Kingman's recommendations has been published and will close on 11 June and is available here. In continuance of its involvement in this process AIA will be submitting a response to the consultation.
Until the new regulator is in place the government is going to begin working with the FRC to implement 48 of the 83 recommendations to address the shortcomings identified in the review, such as lack of transparency and to weak enforcement activity. FRC Chair Sir Win Bischoff said, “in line with the consultation document we believe the speedy implementation of the recommendations can help increase public confidence in audit in the UK. We will move forward to implement the agreed proposals as soon as possible.”
AIA chief executive Philip Turnbull said, “the outcome of the Kingman Review has wide-reaching conclusions for the audit environment in the UK and we are pleased that the government has acted decisively to introduce much-needed reform. AIA looks forward to continuing to work with the government and new Audit, Reporting and Governance Authority throughout this process to implement the conclusions of the independent review."