The End of the Line for the Financial Reporting Council

In this very short post we will react to the news that broke today regarding the future of the Financial Reporting Council. We have covered the FRC on a number of occasions here in Financial Regulation Matters and the posts have been highly critical of what was a feeble regulator. We had only looked previously at the regulator and the fact that it was under review, but today the final decision was made on the future of the FRC.

Founded in 1990, the Financial Reporting Council was today confirmed by the Government as being no more. In its official press release, the Government stated that, after considering the Kingsman Review, the FRC would be replaced with a new regulator. That regulator will be called the Audit, Reporting and Governance Authority. The business media are reporting that the new regulator ‘will have stronger statutory powers, including the ability to make direct changes to accounts and powers to require rapid explanations from companies and publish reports about their conduct in the event of a corporate failure’. Sir John Kingsman, the author of the report that has underpinned this shakeup of the regulatory arena, probably set the process in motion when he labelled the regulator a ‘ramshackle house’ when the official report was published. In establishing the new regulator, the Government has been noted as stating that it was ‘strong’ leadership that will ‘change the culture’ within the accounting sector. However, it is worth noting that altering the culture in this particular field will be no easy task and, in truth, it is difficult to see how a different regulator will achieve this. The first indication of whether there is change on the horizon or whether it is business as usual will likely be the new regulator’s take on the Big Four’s claim that they will separate the consultancy arms from the audit arms themselves – if this is allowed, on the auditor’s terms, then it is business as usual. Another question is whether the audit industry can indeed undergo any major change in respect to the tumultuous period awaiting the UK once the country leaves the European Union – do the Government really have the capital to take on such a corporate behemoth?

Ultimately, the FRC pushed its luck. Clear conflicts of interest and token gestures to eradicate such conflicts were a step too far in the wake of Carillion and BHS – now the regulator has to stop accepting all of its dinner invitations from those it was supposed to protect the public from.


Keywords – FRC, Audit, Regulators, Financial Regulation, Business, UK, @finregmatters

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