Professionals who are cleared of misconduct at the Accountancy and Actuarial
Discipline Board are unlikely to be able to claim substantial costs under plans
to be unveiled in the next few weeks.
The Financial Reporting Council took a £1m hit from PricewaterhouseCoopers
and others when it lost the Mayflower case, but the body has made no provision
for further costs arising in this year’s budget because it expects to make them
‘No allowance has been made for an award, because we don’t think it’s likely
to happen,’ said the regulator’s chief executive Paul Boyle.
‘We are going to propose changes for the AADB which would make the likelihood
of cost awards being lower than they have been.’
Boyle said the announcement of the moves was imminent.
The changes follow legal consultation by the organisation after a case in
which the then Accountancy Investigation and Discipline Board was ordered to pay
a massive cost award of £987,500 against PwC and David Donnelly, former FD of
collapsed bus manufacturer Mayflower.
The proposed 2008/09 budget has also seen an increase by £500,000 to £1.5m
from the 2007/08 budget for accountancy disciplinary case costs, due to the
uptake of new cases.
‘Some of the bigger cases require a greater amount of skills and so need
senior legal experts and investigative accountants. These costs are also the
estimated costs for prosecution but this could change, as it’s not possible to
control the amount of cases that could come in,’ said Boyle.
The FRC’s proposed budget also increases operating costs in relation to
corporate governance, reporting and accounting to £11.9m compared to £10.9m in
The FRC warned that the current market conditions meant that risks to confidence
in corporate reporting would be higher.
‘There is a risk, which might materialise in a relatively short time frame,
that corporate reports may not contain adequate disclosures relating to
financial arrangements and uncertainties in the light of credit market
conditions at the time of approval of financial statements,’ added Boyle.
The organisation has further asked for public comment on its proposals for
the budget as well as plans for the year.
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