FRC consults on 2019/20 draft plan and budget
The Financial Reporting Council (FRC), which is set to be disbanded, is consulting on its draft plan and budget for next year, which will see an 11% hike in its budget requirements as it begins the transition to a new statutory regulator, the Audit Reporting and Governance Authority (ARGA)
28 Mar 2019
The FRC has set an initial budget of £38.1m for 2019/20. This is an increase of 11% compared to the expected 2018/19 outturn (£34.4m) and includes funding to recruit 80 additional staff.
The regulator says this budget does not include certain costs the FRC cannot yet accurately forecast. These include the costs of implementing those recommendations of the independent review of its operations that are currently subject to consultation, and some of the additional costs related to EU exit.
The FRC therefore expects that in finalising its plan for 2019/20 it will require additional resources, estimated to be in the range of £2.4m to £4.9m budget. It will agree with BEIS how the additional resources should be secured.
According to the plan the FRC is amending its Articles of Association to specify that, pending the creation of the new authority, all new appointments to the FRC’s board, including the chief executive officer, will be made by the Secretary of State.
In response to government requests for some immediate changes, the FRC is to expand its work on the quality of that part of an audit conducted overseas, commencing extending the scope of reviews of corporate reports to cover the whole annual report, and broadening its work on oversight of the accountancy profession.
It will also consult on some specific changes to the regulatory framework that do not require legislation, with a view to making the changes following consultation and during the transition to ARGA. These include whether the FRC should reclaim the approval and registration of audit firms conducting public interest audits, and the sanctions that should be applied under a new, centralised approval and registration regime.
The FRC says that, as recommended by the Kingman Review, it is taking forward the recommendation to introduce a robust market intelligence function; and will begin a wider and deeper dialogue with UK investors, building on the present consultative arrangements with its Investor Advisory Group.
It will also be increasing the planned number of corporate reporting reviews undertaken, and completing work on a proposed new standard on the audit of companies’ going concern statements.
Stephen Haddrill, FRC CEO, said: ‘We are pursuing a step change in audit quality - revising audit and ethical standards, expanding our audit quality review regime, extending our audit firm monitoring and supervisory approach, and pursuing a heavier enforcement caseload.
‘We will work with the Competition and Markets Authority on its proposals for reform and with Sir Donald Brydon on his review of the role and purpose of audit.
‘We are expanding our work to monitor the quality of corporate reports and leading debate on the future of corporate reporting. And we will be seeking substantially to enhance investor stewardship through a new Stewardship Code.’
The draft plan and budget are open for comment until 8 May.
Report by Pat Sweet