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FRC overhaul will lead to greater powers

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19th Oct 2011
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The Financial Reporting Council (FRC) and Department for Business, Innovation and Skills (BIS) have launched a consultation that will lead to a major overhaul of the council.

The main aim is to streamline the FRC in making it more efficient and focused on standard-setting, policing, reporting and auditing.

The FRC will be reduced to two board committees focused on:

  • codes and standards
  • conduct

The consultation also proposes to give the FRC powers to require a Recognised Supervisory Body to impose sanctions on an audit firm or individual for poor quality work. It will allow the council more flexibility to make its own rules for disciplinary arrangements, without needing to obtain the agreement of the professional bodies.

FRC chairman, Baroness Hogg, said that at present the FRC consists of seven bodies to do just one core job - promoting good reporting and governance to foster investment.

“A streamlined, unified FRC will help us to regulate less and carry out our role more effectively,” Hogg said. “We are consulting on reforms we believe are urgently needed to secure our independence of those we regulate, reduce the risk of overlapping, over-regulation, and help us to promote the interests of the UK in the international regulatory arena”

The FRC and BIS have invited comments on plans to overhaul the following:

  • setting standards of governance, accounting, audit and actuarial work in the interests of investors in the corporate sector, and focus monitoring and enforcement activity primarily on publicly-traded and the largest private companies
  • narrowing the FRC’s accountancy disciplinary arrangements to cover the quality of work and conduct of accountants in preparing and auditing reports for the capital markets, leaving other cases of potential misconduct to be dealt with by the relevant professional body

The consultation process will run up until 10 January 2012 and the intention is to implement the changes in April 2012.

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