FRC boss warns reforms ‘may not address expectations’
6 Sep 2019
Audit watchdog increases enforcement team by 25% during preparations for move to more powerful Audit, Reporting and Governance Authority as outgoing chairman warns reviews may not address all stakeholder expectations
6 Sep 2019
Sir Win Bischoff, the retiring chair of the Financial Reporting Council (FRC) has warned that the watchdog’s replacement, the Audit, Reporting and Governance Authority, faces continuing challenges and risk in his sixth and final annual report for the FRC.
In the report, he said that the work and recommendations of the Competition and Markets Authority and of Sir Donald Brydon ‘may not address all stakeholders’ expectations’, while the delay in, and nature of, the UK’s exit from the EU continue to give rise to uncertainty.
He also warned that ‘a focus on the future must not divert attention from business-as-usual and the imperative of quality in audit’.
Sir Win is due to be replaced by Simon Dingemans, former CFO of GlaxoSmithKline, while FRC chief executive Stephen Haddrill will be handing the reins over to HMRC boss Jon Thompson later this year.
The FRC’s annual report reveals a 25% increase in its enforcement team in 2018/19, rising from a staff of 28 to 35. During the year, the watchdog imposed £32m in fines, up from £13.1m the previous year. During the year, it opened 15 investigations, closing 13, but as of 31 March 2019 41 investigations remained open. Since its year end it has fined KPMG £10m for audit failures at Equity Red Star and The Cooperative Bank, and Deloitte £4.2m over its work at Serco Geografix.
The report reveals that Sir Win’s remuneration for the year was £120,000 while Haddrill’s pay stood at £425,697. The FRC’s limited company’s operating profit was £1.787m in 2018/19, down from £3.852m the previous year. Total funding for the watchdog was £30.5m in 2018/19, down from £35.5m the previous year.
During the year the FRC substantially revised the UK’s Corporate Governance Code and consulted on an overhaul of the UK Stewardship Code to ensure both codes were ‘fit for purpose, better aligned, and reflect today’s challenges’.
Sir Win said: ‘Our latest annual report reflects the FRC’s commitment to delivering high quality audit, corporate governance and financial reporting, which remain vital to the success of our market economy. To achieve this, we have boosted enforcement resources, maintained a priority on tackling poor-quality audit work and raised the bar on corporate reporting.
‘2018/19 also led to an independent review of the FRC, which we fully supported, and has contributed to our eventual transition into a new regulatory body.’
By Philip Smith