Financial Reporting Council

From WikiCorporates
Jump to navigation Jump to search

The Financial Reporting Council is an independent regulator in the UK and Ireland, responsible for regulating auditors, accountants and actuaries, and setting the UK's Corporate Governance and Stewardship Codes. However, it has suffered from the Revolving Door rotating only too often, leading to its being severely compromised.

After Carillion plc, a construction and services business, collapsed in Jan.2018, the FRC conducted an examination into Carillion's auditor, KPMG[1]
The Business and the Work and Pensions Select Committees reported on the Carillion collapse, and were exceeedingly critical of the FRC, describing it as feeble and timid, and of failing to follow up concerns in Carillion's 2015 accounts. The FRC, along with the Pensions Regulator, was branded as "chronically passive".[2][3]

Business Secretary Greg Clark ordered an independent inquiry into the operations of the FRC itself.[4] In Dec.2018, the review recommended the replacement of the FRC by a new Audit, Reporting and Governance Authority.[5] In Mar.2019,[6] the govt announced that the FRC's replacement by a new regulator, the Audit, Reporting and Governance Authority, with enhanced powers, in an effort to "change the culture" of the accounting sector.[7] The government launched a consultation on the new regulator.[8][9]

Some shocking conflicts of interest going on, see FRC publications > Grant Thornton Nichols plc and University of Salford - Annex A to C key provisions of standards", etc.

The FRC regulates auditors, accountants and actuaries, and sets the UK’s Corporate Governance and Stewardship Codes. The FRC's work is aimed at investors and others who rely on company reports, audit and high-quality risk management.[10]
The FRC is funded by the audit profession, who are required to contribute under the provisions of the Companies Act 2006 and, with HM Government's agreement, by other groups affected by from FRC regulation. The accountancy profession’s contribution to the FRC’s annual funding requirement is paid by the Consultative Committee of Accountancy Bodies, whose members are ACCA, CAI, CIPFA, ICAEW, and ICAS; and by CIMA which contributes to the FRC’s funding requirement under the terms of a separate agreement with the FRC.[11]


  • Dec.18.2018: It is too easy to swap sides between the regulator and the financial industry. Good article, spelling out the pros and cons of the Revolving Door between the FCA and the Financial Services sector. "Some critics also see a danger that the FCA becomes a finishing school for ambitious lawyers and MBAs in their twenties wanting a job-smashing flourish on their CVs before entering the golden gates of a City career. Everyone in the gossipy world of regulation seems to know someone who cynically took an FCA job purely as a springboard or stepping stone. There is a brain drain from the FCA." Patrick Hosking, The Times.
  • Oct.09.2018: Consulting ban could cost audit firms £1bn. The Financial Reporting Council could force the Big Four accountants to strip out more than £1 billion in annual income, or about 10% of total revenues, as it looks into banning firms from providing consulting services to the companies they audit. Frank Field, chairman of the Commons’ Work and Pensions Committee, said in January that poor business practices were being “waved through by a cosy club of auditors, conflicted at every turn”. The FRC is itself under review by Sir John Kingman, who is examining whether it is effective at policing the accounting market. Tabby Kinder, The Times.
  • Apr.20.2018: Disappearing ‘dark lord’ of accountancy. Richard Fleck, former partner of the law firm Herbert Smith Freehills LLP, was chairman of the FRC’s Auditing Practices Board during the banking crisis and became chairman of its Conduct Committee, which initially decided KPMG had no case to answer over its audit of HBOS. In the past few days, his name has been quietly removed from the FRC’s Financial Reporting Review Panel and now Baroness Bowles has tabled a parliamentary question asking the govt why he was appointed to prepare the FRC’s guidance on “true and fair” in 2011 and what account was taken of Herbert Smith having previously advised KPMG and PwC on auditor liability. Dominic Walsh, The Times.
  • Apr.17.2018: L&G chief to lead probe of ‘toothless’ accountancy watchdog. An official review of the Financial Reporting Council was first mooted by business secretary Greg Clark last month as concern grows over the watchdog’s “toothless” regulation of the industry. BEIS confirmed that the review will be led by Legal & General chairman Sir John Kingman, a former Treasury official who joined the FTSE 100 insurer in 2016. Mr Kingman will examine the FRC’s governance and transparency and how it avoids conflicts of interest, as well as its independence, oversight, impact and resources, the BEIS said. Critics are unimpressed: they called for a public inquiry into the FRC led by a retired judge with a panel of assessors. Madison Marriage, The Financial Times. Note: follow the links in this article.
  • Apr.12.2018: The UK has an accounting regulator that refuses to be accountable. The UK accounting regulator has been accused of a “shocking” lack of transparency after it emerged that it has avoided giving full responses to nearly 90% (6/51) of the FoI requests it has received since 2013. Amongst the questions it has refused to answer are ones on whether any of its staff have been seconded to the “Big Four” accounting firms and vice versa and its investigation into the role of KPMG in the collapse of the defunct lender HBOS. We are in the quite absurd position that the regulation of accountancy has been outsourced to those being regulated and (you couldn't make this up) those responsible for delivering accountability are refusing to be accountable for doing so. Richard Murphy, Tax Research UK.
  • Mar.22.2018: ‘Toothless’ accountancy watchdog faces inquiry. Greg Clark, the Business secretary, said he planned to order a review. The council was founded in 1990 and is the senior regulatory body for accountants with powers to fine them or ban them from practising. The council has been accused of being “captured” by the Big Four accounting firms, whose current and former personnel sit on its board and committees. It makes and polices the rules on board governance and shareholder stewardship, as well as regulating actuaries. Mr Clark told MPs yesterday that he disagreed with Stephen Haddrill, chief executive of the council, who has argued that he did not have enough powers to respond more robustly after recent company collapses. The council has been accused of being “captured” by the Big Four accounting firms, whose current and former personnel sit on its board and committees. Last year it raised eyebrows when it cleared KPMG over its audit of HBOS, when it gave the bank a clean bill of health 8 months before its collapse in 2008. It took 12 years to fine Deloitte over failings at MG Rover. It repeatedly refused to investigate KPMG over the Co-op Bank implosion until pressured to do so by MPs. It has serious potential conflicts of interest to manage. Mr Haddrill’s 2nd wife Kate Marshall is the senior business department official responsible for the department’s relationship with the council. ... Natasha Landell-Mills, of Sarasin Asset Management, who has led an informal City campaign for reform of the council, said, “As long-term investors, we and others have been calling for the FRC to be reconstituted for some time. Patrick Hosking, The Times.
  • Mar.19.2018: Local Authority Pension Fund Forum calls for accountancy watchdog to be scrapped. The accounting and financial reporting watchdog, the Financial Reporting Council, should be put in special measures and run by commissioners until it can be abolished and replaced by a fully independent agency, the Local Authority Pension Fund Forum, an influential pensions body, has said. In an excoriating assessment of the failures of the FRC, the LAPFF has accused the regulator of being too cosy with the CBI and the Big Four accountancy firms. The regulator’s chief executive, Stephen Haddrill, has called for an inquiry into whether the Big Four accountancy firms should be forced to spin off their British audit divisions into separate businesses to prevent conflicts of interest. The FRC has come under criticism for being too close to corporate elites and their auditors. Nick Land, chairman of its codes and standards committee, is a former chairman of EY. Roger Marshall, a non-executive director of the council, was formerly with PWC. (more...' Alexandra Frean, The Times.


  1. ^ Carillion accountant KPMG faces probe by watchdog. KPMG signed off on the audited financial accounts, only for the company to go bust nine months later. Grant Prior, Construction Enquirer, Jan.29.2018.
  2. ^ Carillion. Report, together with formal minutes relating to the report. Business, Energy and Industrial Strategy and Work and Pensions Committees, House of Commons, May.16.2018.
  3. ^ 'Recklessness, hubris and greed' – Carillion slammed by MPs Rob Davies, The Guardian, May.16.2018.
  4. ^ PwC charges more than £20m for first eight weeks of Carillion collapse. MPs call fees ‘superhuman’ as accounting firm admits it won’t know final bill until June. Richard Partington, The Guardian, Mar.21.2018.
  5. ^ Independent review of the Financial Reporting Council (FRC) launches report. The independent review recommends that the FRC be replaced with an independent statutory regulator called the Audit, Reporting and Governance Authority., Dec.18.2018.
  6. ^ UK audit watchdog to be replaced by new governing body. The Financial Reporting Council is to be scrapped and replaced by a new regulator for accountancy firms, the UK government has announced. BBC Bews, Mar.11.2019.
  7. ^ UK audit watchdog to be replaced by new governing body. BBC News, Mar.11.2019.
  8. ^ Independent review of the Financial Reporting Council: initial consultation on recommendations. Department for Business, Energy & Industrial Strategy,, Mar.11.2019.
  9. ^ Audit regime in the UK to be transformed with new regulator. Financial Reporting Council to be replaced with a new regulator following review by Sir John Kingman., Mar.11.2019.
  10. ^ ref About the FRC. Financial Reporting Council. Accessed Sept.24.2020.
  11. ^ Funding. Financial Reporting Council. Accessed Sept.09.26.