Reform and retain FRC, says ICAEW
In its submission to the Kingman Review of the Financial Reporting Council, ICAEW calls for increased powers to challenge, investigate and sanction businesses, firms and individuals to promote investor confidence in the UK post-Brexit, backed by greater resources.
The review of the FRC by Sir John Kingman, launched by the UK government in the wake of recent corporate scandals, comes at a “pivotal point for the UK accounting and auditing profession and the UK’s corporate sector”, according to ICAEW’s submission to the review.
Responding to the review’s question on whether the FRC is the appropriate body to represent the UK’s interests in a post-Brexit world, the ICAEW’s submission said the FRC is the right body, but that significant changes in its governance, powers, culture and ways of working are required if it is to fulfil this ‘vital forward-looking role’.
Vernon Soare, ICAEW Chief Operation Officer, said: “In a post-Brexit world, the UK must be seen as a great place to invest and to do business. A part of this will be a regulator of global standing, which can deliver confidence, both international and domestic, in the UK’s standards for corporate governance, auditing and accounting.
“ICAEW believes the Financial Reporting Council could fulfil that role. But it will need a tighter remit from government, defined boundaries, strengthened powers and a tireless commitment to drive improvement. We hope the Kingman Review will recommend that the FRC is reformed and retained.”
The ICAEW submission highlights a number of issues:
- The primary responsibility of the FRC should be to create and sustain domestic and international investor confidence in the UK business sector by setting, promoting and maintaining high standards of corporate governance, financial reporting and public interest entity (PIE) audit.
- The FRC should operate with enhanced integrity, and its relationships with government, business and the professions should support its institutional autonomy and its ability to act at all times in accordance with its statutory responsibilities.
- The responsibilities and powers of the FRC should have full statutory footing including a clear statement of its regulatory objectives, similar to how the responsibilities of the Legal Services Board are enshrined in the Legal Services Act 2007.
- The FRC should have powers to challenge, investigate and sanction businesses, firms and individuals, sufficient to deter unethical or other non-compliant conduct - including full access to all documents and records necessary for such actions.
- The FRC needs to recognise the importance of the UK’s small and medium enterprises (SMEs) and small and medium practices (SMPs) to the UK economy, both in the approach it takes to setting accounting and auditing standards for this sector and the representation of persons with the requisite experience within the FRC’s governance structure.
- The FRC should be adequately funded and resourced to undertake its primary responsibility, including the international aspects.
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