The Financial Reporting Council was not “strong enough” to tackle business and audit scandals that have provoked soul-searching in the sector and a revamping of corporates governance rules.
“Were we complicit or in some way responsible for corporate failure? Well, it’s probably arguable that as a regulator we weren’t anywhere near as strong enough, we weren’t big enough, and we weren’t transparent enough to make a difference to the system,” Sir Jon Thompson, chief executive of the regulator, told The Financial Times.
Sir Thompson, who started his role as CEO in September 2019 also said that he was “surprised” that there wasn’t yet a programme of change at the regulator following the critical 2018 report by Sir John Kingman.
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“We’ve been doing a lot more than the 83 recommendations in terms of rebuilding the organisation and its systems, and its processes and its transparency,” he said, adding that the regulator needed further legislation to give it more powers.
Sir Kingman, who had described the FRC as a “ramshackle house…built on weak foundations”, had recommended replacing the FRC with a more effective regulator, something Thompson said would not be in place until 2023. The Audit, Reporting and Governance Authority is due to replace the FRC.
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Earlier this year, the UK government’s Department for Business, Energy and Industrial Strategy published its 262-page consultation document on reform of the audit sector. Its recommendations include the operational separation of the audit and non-audit arms of Big Four firms to reduce conflicts of interest.
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