The UK Financial Reporting Council (FRC) has issued the report on the independent review of the sanctions imposed under its enforcement procedures conducted by the Review Panel and chaired by former court of appeal judge Christopher Clarke.
The report reads that in specific circumstances, like cases involving seriously poor audit work carried out by a Big Four firm, a fine of £10m ($13.23m) or more could be an appropriate measure.
The primary purpose of imposing sanctions for acts of misconduct is not to punish, but to protect the public and the wider public interest, according to the 72-page document.
On top of analysing the approach to be taken when determining sanctions, the document defines tariffs and guidelines as well as fines & financial penalties.
It also suggests greater attention towards the use of non-financial penalties, useful to maintain and enhance the quality and reliability of future audit and accountancy work and the removal of any requirement for tribunals to consider themselves bound by previous cases when determining the appropriate sanction to impose.
The document is the answer to the stakeholders’ feedback that the sanctions imposed under the FRC’s enforcement procedures were too low and comes at a time when the UK watchdog has been criticised for having “no teeth”.
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Professor of accounting and finance at the University of Sheffield Prem Sikka said: “The biggest problem with the report is the failure to examine the domination of the FRC by the corporate sector and accounting industry, in particular.”
Never mind the fines, the FRC mysteriously abandons investigations – HBOs, Barclays – altogether, Sikka continued. “There is no accountability of such actions. Since the evidence relating to abandoned investigations is not published there is no way of ascertaining FRC’s even-handedness. Even when the FRC publishes a report, the evidence on which it is based is not publicly available. All we have are some carefully selected words and from that it is impossible to judge the appropriateness of sanctions. In short, the report fails to address questions about transparency, public accountability and capture of the FRC, all of which are relevant to making sense of FRC’s operations.”