FRC fines see expenditure come in under budget
The Financial Reporting Council (FRC)’s total expenditure for the year came in under budget, in part because of the amounts it received in costs from a series of high profile investigations into accountancy firms, according to the regulator’s 2017/18 annual report
15 Oct 2018
Total expenditure for the year was £31.7m, compared to £29.3m the previous year, but below the FRC’s budget of £35.3m. As well as a cut in staff and procurement costs, the regulator said it made savings from enforcement costs.
These were originally put at £5.5m in its budget. Actual incurred case costs for the year were £6.6m but this was reduced by £3.3m because of costs awarded to the regulator in the year.
The FRC collected £13.1m in total from penalties imposed on 11 firms. This is considerably higher than the previous year (£9.3m) and the £1.3m levied as fines in 2015/16.
In 2017/18, the regulator concluded investigations which led to sanctions against six individuals and three audit firms. Among the fines was one of £5.1m imposed on PwC over failures in the audit of RSM Tenon, the largest fine at the time. There was also a £5m fine imposed on PwC over the Connaught investigation; and a £1.8m fine for EY over Tech Data.
Since the year end, KPMG has been fined £3.15m over failing relating to Quindell, while PwC was fined £6.5m over its handling of the BHS/Taveta accounts. The FRC noted that this fine was discounted on settlement from £10m and represented the largest it has ever imposed.
The annual report includes a note about the FRC’s investigation into KPMG’s 2007 and 2008 audits of HBOS, which were heavily criticised for the length of time it took the regulator to act.
The FRC noted: ‘Complex investigations need to be undertaken thoroughly and must take time; but we remain committed to meeting our target to complete new investigations within two years.’
The report states that this target was introduced in 2016/17 and applies to cases where the decision to investigate took place on or after 1 April 2016.
The FRC states ‘we are, in general, meeting our target’.
The annual reports covers the FRC’s first full year as competent authority for statutory audit in the UK. During the period, it consulted on a major review of the UK Corporate Governance Code, and introduced new arrangements for enhanced monitoring and supervision of the six largest audit firms.
Sir Win Bischoff, chairman of the FRC, said: ‘Rebuilding public trust in business and responding to changing expectations of all stakeholders are at the heart of what we do. We will continue to take robust action to meet our objectives and ensure the UK remains a magnet for global capital and a centre of excellence for the professions.’
FRC annual report 2017/18 is here
Report by Pat Sweet