The Independent Review of the Financial Reporting Council (FRC) led by Sir John Kingman published its report to government 18 December 2018. The review recommends that the FRC be replaced with an independent statutory regulator, accountable to Parliament, with a new mandate, new clarity of mission, new leadership and new powers. The new regulator would be called the Audit, Reporting and Governance Authority (ARGA) and will have a different culture and statutory objective to serve the interests of users of accounts. It is anticipated that ARGA will also act to promote competition in the audit market.
Sir John was asked by the Secretary of State for Business, Energy and Industrial Strategy (BEIS), Greg Clark, in April to lead a root-and-branch review of the FRC; the report sets out 83 recommendations.
Business Secretary Greg Clark said that the independent review ‘proposes extensive and fundamental reform’ for the regulation of audit, corporate reporting and governance.
In addition Sir John also published his response to the request to consider whether there was any case for change in the way in which audits are currently procured, and audit fees and scope are set, particularly for major companies of public interest.
AIA Chief Executive, Philip Turnbull said: “AIA welcomes the publication of the independent review of the Financial Reporting Council led by Sir John Kingman, which sets out a bold vision of regulation with a statutory underpinning.
“The report makes extensive and fundamental recommendations to improve the regulation of audit in the UK and AIA looks forward to working with the government and new Audit, Reporting and Governance Authority to implement the conclusions of this independent review.”
The Independent Review of the Financial Reporting Council report comes as the CMA publishes its interim findings on competition in the market and the government announces next steps in improving standards of UK audit market with a new independent review into audit standards
The new independent review will consider standards being delivered by UK auditors and what more can be done to make them more effective and reputable, what the standards and requirements should be for the UK audit profession in the future and is tasked with recommending what more can be done to ensure audits meet public, shareholder and investor expectations.
The report of the Independent Review can be accessed here.