FRC to use firms’ revenues to calculate disciplinary fines

FRC to use firms' revenues to calculate disciplinary fines

In less than two months, audit and non-audit clients, profitability per partner and market could be considerations when handing out disciplinary fines

THE FRC’S disciplinary arm has been given the green light to look at firm revenues and profits per partner when handing out disciplinary sanctions with no upper limit, from next year.

The financial watchdog published a summary of the consultation responses, its reply to those responses and the updated Sanctions Guidance for Tribunals – due to take effect on 1 February.

In the guidance, factors such as profitability per partner, market share, number of audit and non-audit clients and their size, revenue, and profitability could be factors in deciding the level of fine to impose on a member firm.

There will also no longer be an upper limit on financial sanctions.

This action is in contrast to the summary of consultations which claim that revenue/profitability should not be considered in dishing out fines. However, in response the FRC said the tribunal must decide what level of sanction would give the necessary message of deterrence and it should also take into consideration the firm’s ability to pay.

“Where revenue is not an appropriate indicator of financial means, a tribunal should seek an appropriate alternative measure. Other indicators of financial means include the level of profitability per partner, market share, the number of audit and non?audit clients and the respective size of those clients, the number of principals, partners and registered individuals,” the guidance states.

It was also suggested in the consultation that the engagement fee should be a starting point for deciding the level of sanction. However, the FRC disagreed because it was “unlikely to enhance public confidence in the profession”.

Respondents included the Big Four, ACCA, ICAEW, ICAS, CIMA, CIPFA and BDO.

Share

Subscribe to get your daily business insights

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata
Professional Services

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

3y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

3y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine
Accounting Firms

Turn Accounts Payable into a value-engine

3y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021
Making Tax Digital

Digital Links: A guide to MTD in 2021

3y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource