PracticeAuditAll systems go for reformed FRC

All systems go for reformed FRC

With plans for the new, more powerful, Financial Reporting Council well underway, its chairman Sir Bryan Nicholson has made it clear that the new body means business.

Link: FRC seeks budget approval from UK plc

In a speech to the ICAEW annual conference last week, Sir Bryan said he wants to see a budget for the new council that will be twice as much as the combined funding for the soon-to-be-defunct Accountancy Foundation and the current FRC.

If confirmed, at somewhere around £12m a year, this would give the FRC the resources, as well as the powers, to help restore confidence in the battered reputation of the accountancy profession.

Sir Bryan has confirmed that the government is willing to pay for a third of the costs, and with the accountancy profession already providing a similar level of funds through its current commitments to the FRC and Accountancy Foundation, there is little opposition expected to this budget plan. The only potential stumbling block is the funding from private listed companies, to be raised by the Financial Services Authority. They will see a significant rise in costs from today’s levels.

As a result, Sir Bryan told Accountancy Age he intends to hold talks with a number of bodies representing listed businesses, including the CBI and FSA, and hopes to have the matter resolved by the end of September.

Although not expected to take on its official duties until early next year, some time before it starts working on a joint budget in April, the body is on the way to defining and assuming many of its roles prior to that.

The aims and objectives of the new board were approved at a council meeting in May and the work programs for each board are due to be published early next month. ‘This is a level of openness and transparency that has been lacking (at the FRC) before and reflects the importance of the work that is being carried out,’ said Sir Bryan, labelling the work programs ‘extremely important building blocks’ for the new body.

Indeed, although the foundation’s investigation and discipline board is still an official entity, it has effectively been mothballed and the FRC, under the auspices of chairman Mike Fogden, is on the brink of taking over the role.

The new FRC will be responsible for five boards altogether. Alongside Fogden’s Investigation and Discipline Board, the Auditing Practices Board will be moved over from the Accountancy Foundation. Chaired by Richard Fleck, it will help in the development and application of auditing standards as well as working on the ethical side of the practice.

The council will also retain its two current boards. The Accounting Standards Board, under Mary Keegan, is likely to devote much of its time to issues surrounding the impending arrival of new international standards to these shores. The Financial Reporting and Review Panel will also remain, but is likely to be much changed from the body it has been.

The government has asked the FRRP to take a more proactive approach in its work instead of simply reacting to information provided to it. The panel will now look for cases itself, with help from the FSA among others, and will focus on companies where material misstatement will have an impact on the market. Huge resources will be thrown into this and many of the 30 or so extra staff that the new FRC takes on will be dedicated to this new task.

Many of the other positions will be dedicated to the new board that joins the four already established bodies. The Professional Oversight Board for Accountancy will be headed by Sir John Bourn but its roles will effectively be split into two, each with their own director. The Audit Inspection Unit will monitor the audit of listed companies and other important entities, while a separate unit will review the regulatory activities of the accountancy bodies in areas such as education, standards, discipline and other ethical matters not covered by the APB.

‘Essentially all the key issues are moving behind us now,’ said Sir Bryan. ‘But there is still a lot of work to be done putting everything in place.’

Sir Bryan said the FRC was now working on a detailed implementation plan to bring the two organisations together and was addressing many of the practical and legal issues that such a move would involve.

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