The Department for Business, Innovation and Skills (BIS) and the Financial Reporting Council (FRC) are launching a consultation proposing the refocusing and streamlining of the FRC. The aim of the reforms is to create an FRC that is clearer about its role and purpose, proportionate in the execution of that purpose and in a strong position to promote the highest standards of corporate reporting, governance and auditing.
Stakeholders have been invited to comment on whether the scope of the FRC’s regulatory activities should be narrowed to focus on areas of greatest concern to the operation of the capital markets and, in particular, on the following proposals:
- The FRC should set standards of governance, accounting, audit and actuarial work in the interests of investors in the corporate sector, and focus monitoring and enforcement activity primarily on publicly-traded and the largest private companies.
- The scope of the FRC’s accountancy disciplinary arrangements should be narrowed to cover the quality of work and conduct of accountants in preparing and auditing reports for the capital markets, leaving other cases of potential misconduct to be dealt with by the relevant professional body.
The consultation also proposes reinforcing the FRC’s independence by providing it with:
- The power to require a recognised supervisory body to impose sanctions on an audit firm and/or individual auditor in respect of poor quality work.
- The ability to make its own rules for disciplinary arrangements in relation to accountants, without needing to obtain the agreement of the accountancy professional bodies.
The consultation also proposes replacing the FRC’s existing seven operating bodies with two board committees – one focusing on codes and standards, the other on conduct.
Responses to the consultation are invited by 10 January 2012. The intention is to implement the changes, guided by the responses to the consultation, in April 2012.
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