As preparations continue for the overhaul of regulatory arrangements relating to corporate reporting in the UK, the Financial Reporting Council (FRC) continues to emphasise its high expectations of auditors and companies and its increasing readiness to take action where they are not met. Earlier this week, Director of Corporate Governance, David Styles, confirmed that alongside its work encouraging adoption of and adherence to the Corporate Governance Code and Stewardship Code, it is building its supervision and enforcement capacity.
This reiterates the message sent in the FRC’s Draft Plan and Budget and to become in the words of FRC’s Chief Executive Sir Jonathan Thompson “a bolder, more forceful regulator that will act with pace in supervising and holding companies to account”. The plan indicates that enhancements in the FRC’s enforcement capability are being made partly in anticipation of the implementation of the recommendations of the Kingman Review, which concluded in December 2018. That review suggested that the FRC should be replaced by the Audit Reporting and Governance Authority (ARGA), a new regulator with a broader remit and tougher powers to investigate and take action in respect of breaches of audit, reporting and corporate governance standards. No firm timescales have yet been set for the launch of ARGA although further timings are expected soon.
“The strategy builds a bolder, more forceful regulator that will act with pace in supervising and holding companies to account. “Ahead of the FRC’s transition into the Audit, Reporting and Governance Authority (ARGA) I am determined we use our powers to the fullest, to respond to corporate governance challenges. “The failure of a major company has significant impact, not just for investors, but for employees and communities.” “The public has a major interest in the health of companies which is why we plan to serve that public interest by using our powers to the fullest within our existing regulatory scope.”