New financial services body to discipline auditors

THE FSA'S successor could have stronger powers to discipline auditors, potentially creating an overlap with the accountancy profession's watchdog.

The Financial Services Bill, which introduces a new regulatory regime to replace the FSA, includes new disciplinary powers aimed at punishing auditors.

The ICAEW has said it believes the new powers are an extension of existing controls, however, the Financial Reporting Council has argued against the institute's opinion.

According to the ICAEW, the FSA currently has the ability to reprimand auditors by disqualifying them. However, these powers only apply to a narrow scope of an auditors' role, where they fail to comply with the financial services and markets act - which can include not co-operating properly with the FSA.

The bill states that it has created "new powers to take disciplinary and supervisory action", which includes disqualifying an auditor from working with a financial service company, imposing a financial penalty and publicly censoring them.

The new powers could potentially cause an overlap with the accounting profession's watchdog the Financial Reporting Council.

Iain Coke, head of financial services at the ICAEW, said the latest bill had "widened" the financial regulator's powers but believed that disciplinary matters against auditors was better placed with the FRC.

Coke also questioned whether it was wise to have a number of bodies looking at audit issues where one could work better.

However, a spokesman from the FRC said the latest bill was not a change from the current powers already held by the financial regulator.

The details were uveiled in the Financial Services Bill, which includes the abolition of Financial Services Authority and the introduction of the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA).

Earlier this year FRC disciplinary arm the AADB fined PwC £1.4m for falling short of requirements in its audit of JP Morgan Securities Limited and has several investigations pending, including a complaint against jailed accountant and former Langbar chief Stuart Pearson.