FRC overshoots budget by £1.6m
Total expenditure in 2012/13 was £25.5m, driven up by a rise in disciplinary case costs
A RISE in disciplinary case costs over the last year has resulted in the FRC overshooting its yearly budget, the accounting watchdog said in its latest set of annual accounts.
Total expenditure in 2012/13 was £25.5m, £1.6m higher than budget, which the FRC attributed to the number and complexity of disciplinary cases undertaken during the course of the year, while its battle with Deloitte over apsects of the firm’s corporate finance advice on transactions related to MG Rover went to tribunal during the period.
Accountancy disciplinary case costs came in £1.8m over budget at £5.8m, though the FRC was able to make savings of £0.2m to the cost of its audit quality reviews as it was able to carry out the required number of audit inspections with fewer staff than budgeted.
Within core operating costs, staff costs were up by £0.8m as additional resources were engaged to focus on high priority projects, though this was offset by savings in the external costs of the FRC’s reform programme and in IT support.
The combined annual report is the first since the reforms that brought the FRC’s eight regulatory bodies into one, and the first in which it reports formally to parliament.
“Reform has enabled the FRC board to work more effectively with the market. The FRC has raised its game and created a greater focus on its primary task – trying to ensure that investors in the capital markets have what they need: effective boards; useful annual reports and accounts; easily comparable standards and good audit and actuarial standards,” said outgoing chairman Baroness Hogg.
Major work undertaken by the FRC over the past year includes putting forward recommendations of the Sharman panel’s going concern guidance, introduced a new reporting standard to replace UK GAAP and updating the corporate governance code to include a comply or explain provision for mandatory audit tendering.
Last year also saw the FRC replace its external auditor for the second time in as many years. Having previously changed auditor from Crowe Clark Whitehill to PKF in October 2011, the FRC was forced to switch auditors when PKF merged with BDO, which provided non-audit services to the regulator.
Following a competitive tendering process in January involving three firms, haysmacintyre was appointed as auditors for the year ended March 2013. CCW had been auditor since the FRC’s inception in 1990, having successfully won a retendering contract in 2006.
Looking ahead, the FRC said it will continue to lead debates at European level issues including long termism, audit tendering, non-audit services, IFRS endorsement and the company law action plan.
“Our focus on Europe will continue to grow as we seek to influence further the debates in Brussels in the run up to and beyond next year’s Parliamentary elections and change of Commission, especially on long-term finance, audit rotation and the importance of a Stewardship approach,” said FRC chief executive Stephen Haddrill.