The Financial Reporting Council (FRC) will be closed and replaced with a new audit regulator following criticism of their effectiveness of the existing organisation following a string of audit scandals at major listed companies
The move follows recommendations from the Kingman Review which recommended a complete overhaul of the FRC, and led to the early announcement that current CEO Stephen Haddrlll would step down in 2019.
The new body to be known as the Auditing, Reporting and Governance Authority (ARGA)will have a new mandate, new leadership and stronger powers set down in law.
The top leadership of the body will be overhauled with recruitment process for a new chair and vice chair starting immediately.
The BEIS consultation states: ‘As a first step we will move now to appoint the chair-elect and deputy chair-elect of the new regulator, who in the meantime will be chair and deputy chair of the FRC.
‘With their input we will then similarly appoint the new chief executive officer (CEO) and, in due course, other non-executive appointments.
‘The FRC Board has agreed to amend the FRC’s articles of association in the interim to specify that all members of the board and the CEO will be appointed by the Secretary of State.’
FRC Chair, Sir Win Bischoff, said: ‘We welcome this consultation and hope that a diverse range of organisations and individuals respond to it. In line with the consultation document we believe the speedy implementation of the recommendations can help increase public confidence in audit in the UK. We will move forward to implement the agreed proposals as soon as possible.
‘After five years as Chair of the FRC I will hand over my responsibilities as soon as the appointment of the next Chair becomes effective. Our Deputy Chair, Gay Huey Evans, will retire from that position after seven years at the end of her term of office on 30th April 2019.’
Andrew Gambier, head of audit and assurance, ACCA says: ‘MPs at BEIS committee see it as a done deal, almost asking Stephen Haddrill when he is moving out.
‘There are 83 points in the Kingman review. FRC is working through them. It will happen, will not be an entirely new body, with a new agenda, will have to adopt some of the staff and the way they work. We are going to see quite a different organisation.'
The government notes the review’s recommendation that the position should be reviewed following completion of the Competition and Markets Authority’s (CMA) current market study on competition in the audit market. Putting the ARGA on a statutory basis will require primary legislation. This will have to be debated in parliament so will therefore not be a quick process.
There will be a 11-week ocnsultation period to determine the future remit of ARGA and timetable for replacing the existing regulator.
Consultation: Independent review of the Financial Reporting Council: initial consultation on recommendations closes for comment on 11 June 2019.
Report by Sara White