FRC resolves record number of cases
Released 31 July 2020
The Financial Reporting Council (FRC) has published its second Annual Enforcement Review (AER). The report highlights driving audit quality improvements through securing cultural change by those responsible as a key priority for the Division with a greater use of constructive engagement and the wider deployment of tailored non-financial sanctions in cases where enforcement action has been required.
The report reveals that timeliness remains a key priority for the Division and that increased resourcing in the Division, which grew by 14% over the course of the year, is beginning to have a real impact with material improvements recorded against the FRC’s published two-year KPI.
The review also offers a detailed analysis of concluded cases over the last six years to identify recurring themes. The overwhelming majority of cases have involved a failure to exercise professional scepticism and a failure to obtain sufficient audit evidence, matters that go to the heart of strong audit.
Elizabeth Barrett, FRC Executive Counsel and Executive Director of Enforcement said:
“Given the detrimental impact audit failure can have on investor and wider stakeholder confidence it is critical that when audit standards are not met or ethical failures occur, they are identified and rectified. This year’s AER shows an increased use of constructive engagement, to provide a timely and proportionate way of addressing deficiencies and the wider deployment of non-financial sanctions to drive audit quality. The overall results for the year also reflect the impact of a larger and more effective enforcement division.”
Further information can be found at https://www.frc.org.uk/news/july-2020/frc-resolves-record-number-of-cases-through-constr.