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October 16, 2011

UK FRC plans major restructure

The UK Financial Reporting Council (FRC) is planning to streamline its operations and allow accountants to settle disputes to help clear a backlog of disciplinary investigations.

The FRC currently has a number of subsidiary organisations, including the Accountancy and Actuarial Discipline Board, the Auditing Practices Board, the Financial Reporting Review Panel and the Board for Actuarial Standards.

Under the restructuring proposal, these bodies will merge and be split into two subsidiaries: the Conduct Board and the Code & Standards Board, which organises bodies by their function rather than accounting stream.

The aim is to ensure that information between specialities from different streams, such as audit and accountancy, can be shared.

Another major plan is to strengthen the disciplinary process by allowing accountants to negotiate a settlement in cases where professionals and firms accept there has been wrongdoing. This is aimed at avoiding disciplinary tribunal hearings, which are time consuming and have proven difficult for the regulator to win.

The settlement proposal is also aimed at reducing a 5-year backlog of investigations.

The investigation into Deloitte’s auditing of MG Rover for example has taken a long time to begin as the government investigation had to finish first before the FRC could proceed.

“There’s the opportunity not to go down a very lengthy time consuming, costly and also damaging to reputation process but actually settle earlier and settle quickly,” the spokesperson said.

“All the work we do is about trying to improve the quality of reporting and auditing and changing the behaviour. We’re not the kind of regulator that comes in and just wants to catch people out, slap them over the wrist and give fines. We actually want to inform the market about the areas we’re looking at, we want to work with [the offenders] to improve the quality of audit.

“So, [the FRC will be] encouraging the firms to put in place different policies…[such as] changing the processes in the firm or putting the audit team on better continuing professional development training and demonstrating that in the next reporting cycle.”

Other changes include making the FRC more independent from professional accounting bodies such as the Institute of Chartered Accountants of England and Wales while transferring some of the more minor audit oversight duties back to the institutes.

 

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