Interview with the FRC
Nigel Sleigh-Johnson speaks to the FRC's Melanie Hind about changes in audit and its regulation.Melanie Hind stepped down this summer as an executive director of the Financial Reporting Council (FRC) after more than six years. Before she departed to explore a family opportunity in the US, the ex-auditor took time to reflect on how audit and the FRC has changed, and what the future holds. Hind says she’s proud of what the FRC has achieved and her contributions. In her initial role as executive director, codes and standards, Hind successfully concluded the FRC’s decade-long programme to reform UK accounting standards, as well as implementing extended auditor reporting and introducing the requirement for the viability statement in the UK Corporate Governance Code.
She moved into her role in audit and actuarial regulation, just in time for 17 June 2016. “It was a big day,” she says, referring to the European Union (EU) Audit Regulation Directive (ARD) becoming applicable across the EU and the FRC becoming the competent authority for audit regulation. “The UK participated strongly in development of the EU regime and it has been very positive,” she recalls, citing mandatory firm rotation and retendering as stand out examples.
Responding to RisksThe audit business model has been transformed by the UK implementation of the ARD, she suggests: “The risk-reward ratio in audit has changed. Let’s be clear, audit used to be an annuity in perpetuity and now it isn’t. This has combined with increased regulatory scrutiny to drive up the quality of audit and that is a good thing.”
Getting audit back on policymakers’ agendas – as something in the public interest that needs close attention – is the most significant audit development of the past five years, says Hind. Nonetheless, she has concerns about the public interest entity (PIE) definition in the ARD: “It may not be in the right place, because it is a post-financial crisis response.”
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