In October 2011, the Department for Business, Innovation and Skills (BIS) and the Financial Reporting Council (FRC) launched a joint consultation on proposals to reform the FRC. The proposals were designed to clarify the FRC’s scope, streamline its governance and structure, and give it greater independence from the accountancy profession and a proportionate range of sanctions against poor quality auditing. The Government continue strongly to believe that these are the right objectives.
The response to the consultation helped the Department and the FRC refine the proposals. In particular the proposals have been amended to enhance the status of the expert groups that will advise the FRC board on accounting, auditing and actuarial issues and to make clear the procedural safeguards that will be put in place as part of the FRC’s monitoring and enforcement work.
This recognises the important and valuable work that the recognised supervisory bodies (RSBs) and the recognised qualifying bodies (RGBs) undertake. The overall reforms will give greater clarity to the boundaries between the professional bodies and the FRC.
BIS is today publishing a response to the consultation, which sets out the Government’s intention to introduce legislative changes to enable the FRC to implement the finalised reform proposals. The proposed changes will delegate most of the powers to the FRC board rather than its operating bodies as at present, apart from the financial reporting review panel (FRRP) powers which will move to the new conduct committee, and will provide the FRC with powers to:
determine and require, rather than request, an RSB to impose proportionate sanctions in respect of poor quality work;
conclude disciplinary cases without a public hearing where this is in the public interest and subject to appropriate publicity; and
take proportionate action against and RSB or RQB for shortcomings in discharging their regulatory responsibilities.
These changes will ensure the UK has a powerful, joined up voice on the international stage, which involves high quality and informed technical expertise to continue to strengthen our significant influence.
Taken as a whole, the proposals are expected to reduce the costs associated with FRC regulatory activities.
The Government intend, subject to Parliamentary approval, to bring forward secondary legislation for the changes to come into force from Monday 2 July 2012.
The consultation response (which is published jointly with the FRC), and the final stage impact assessment are available on the BIS website at: http://www.bis.gov.uk/consultations