Audit regulator’s plan welcomed by auditors and accountants, but some are frustrated at the pace of change.
The Financial Reporting Council (FRC) has set out its three-year plan to form its successor body, the Audit, Reporting and Governance Authority (ARGA), as part of government plans to overhaul audit and corporate governance.
The new watchdog is intended to be put on statutory footing and given stronger powers than the FRC currently has. The push to overhaul audit governance came as a result of Carillion’s collapse in 2018. FRC tribunal proceedings are currently underway against KPMG, a former KPMG partner and some current and former KPMG employees over the audit of Carillion.
The plan, published on 5 April, contains a detailed breakdown of intended expenditure for 2022-23 and a summary of the expected trajectory of overall costs and headcount for the following two years.
In setting out its plan, the FRC has considered how, and when, it will need to increase the capacity to adapt to new powers and responsibilities. In 2022/23 overall costs are budgeted to increase by £9.1m with similar growth anticipated in 2023/24, which is the year it expects ARGA to begin its work.
FRC chief executive Sir Jon Thompson said: “In the three years since Sir John Kingman’s review of the FRC, we have made significant progress implementing those recommendations within our power to ensure better outcomes for stakeholders who rely on high quality audit, reporting and corporate governance. As we continue to lay the groundwork for ARGA it is pleasing to see the continued level of support from our stakeholders for the FRC’s current plan.”
However, some, including the Chartered Institute of Internal Auditors (CIIA), have expressed frustration at the pace of the move and concern that ARGA may not have the teeth originally hoped for.
“The fact remains that until the government issues its response to the audit White Paper it published over a year ago, and until it commits to passing the legislation required to put the audit regulator on a statutory footing with the legal powers it needs to do its job effectively, then the audit regulator will remain limited in what it can do to restore trust in audit and corporate governance,” CIIA’s head of policy and external affairs Gavin Hayes said.
“Given it has now been over four years since Carillion collapsed and over three years since Sir John Kingman’s review of the FRC the need for action is long overdue. It is essential that time is found to pass legislation in the next parliamentary session,” he added.
Calum Fuller Calum Fuller is editor of AT and 20 magazines. He's previously served as editor of Credit Strategy, assistant editor Accountancy and began his career at Accountancy Age..