The UK’s Financial Reporting Council (FRC) has imposed record financial sanctions of £46.5m ($56.6m) for misconduct and breaches of standards (before adjustments for admissions/ early disposal), up from £16.5m in 2020/2021.
The regulator’s fourth Annual Enforcement Review also found that the FRC that a record number of cases (13) had been solved in the year 2021/2022. Additionally, there was over 100% increase in non-financial sanctions, up from 28 to 62.
The FRC said that the increase in total financial sanctions reflect the seriousness and high number of cases concluded. It also said it reflects the regulator’s growing capability to take on the large and complex cases which are an increasingly prominent feature of its work, supported by a 23% growth in in the enforcement Division’s headcount.
The report revealed that the increased focus on non-financial sanctions has continued. Non-financial sanctions, which are carefully tailored to the facts of each case, are becoming increasingly sophisticated with a focus on tackling the underlying causes of failure in order to reduce the risk of recurrence.
While the regulator has continued to encourage and incentivise full cooperation, progress has been slower than hoped for.
For the vast majority of concluded cases, a lack of audit evidence and a lack of professional scepticism featured.
FRC executive director of enforcement Elizabeth Barrett said: “High-quality financial reporting and audit are vital to provide users of financial statements with confidence in the accuracy of those statements and to uphold trust in corporate Britain.
“The level of financial sanctions imposed in the year underscores the important dissuasive role they continue to play, while the further increase in the use of bespoke non-financial sanctions reflects the ongoing emphasis placed on identifying the underlying causes of failure and effecting long term positive change. Such sanctions play a key part in our role as an improvement regulator.”
The full report is available here. Barrett can also be heard discussing the report’s findings in this FRC podcast