FRC announces budget and sets out transition pathway
The Financial Reporting Council (FRC) has set a budget of £37.8 million for 2019-20 and will focus on hiring additional staff to pursue a change in audit quality and strengthen enforcement.
The FRC plans to recruit an additional 80 people in the next 12 months as it commits to push forward quickly its transition to the new regulator, the Audit, Reporting and Governance Authority (ARGA).
The FRC’s budget for its core operating costs is £32.4 million, an increase of 14 per cent compared with its spending in 2018-19 (£28.4 million).
“The FRC’s plan sets out a clear pathway towards the establishment of an enhanced authority, with stronger powers and greater resources, as quickly and effectively as possible,” said Stephen Haddrill, CEO of the FRC.
“Ahead of full implementation of the Kingman proposals, the FRC will do all in its power to promote transparency and integrity in business, and improve audit quality, corporate governance and investor stewardship.”
FRC’s overhaul over the next 12 months follows wide-ranging and highly critical Kingman review, which made a number of recommendations into the future of the council.
The overhaul will see the FRC transition into a new authority, ARGA, which will be accountable to Parliament, with a new mandate, new clarity of mission, new leadership and new powers.
“While legislation will be needed to establish ARGA, we will be working with the government as a priority to take forward those aspects of the transition that can be undertaken or initiated in advance of the legislation,” the FRC said.
“We have already set in hand measures to strengthen our supervisory and enforcement work, which are reflected in this plan, and in the budget we have set.”
FRC has been widely criticised for failing to act quickly to deal with audit failures.
There have been a number of high-profile business collapses in which the role of the auditor has been proven inadequate or has been called into question. The FRC’s inability to deal with these issues has raised questions about its independence and enforcement capabilities.
Among FRC’s strategic priorities for 2019-20 is to increase the planned number of corporate reporting reviews and use its expanded enforcement resources to manage an increasing caseload and accelerate decisions.