Link: FRC special report
It is daunting but already the omens are good. The FRC’s predecessor, the Accountancy Foundation, was a regulator designed for what would now seem to be a benign environment. It suffered several delays before getting off the ground. Once it was operative, Enron and Worldcom hit, events for which it was ill-prepared.
This time it’s different. Business and the profession were set a challenge by government to come up with an effective system of quasi self-regulation – and quickly.
The FRC has lived up to the demands of that timetable and already looks better equipped to deal with corporate challenges.
Meanwhile, the council’s launch event on Monday was as star-studded as the financial world gets, with institute presidents and chief executives, regulators and City interest groups all rubbing shoulders.
But the FRC will need more than a combination of sound preparation, fortuitous timing and the support of the accountancy great and good to make it a success.
After all, it faces challenges left, right and centre. For one, it needs to be seen to be more effective than its mark one version. In that respect it faces a catch-22 situation. It needs an early triumph, yet it will not want to be tested too early with too big a scandal. Officials will be hoping that the Financial Reporting and Review Panel’s first-wave review of company accounts throws up just that kind of scenario.
Striking a balance will be critical, though chairman Sir Bryan Nicholson could do worse than to turn to his chief executive Paul Boyle for advice.
Boyle’s former employer, the Financial Services Authority, faced these same challenges when it took over responsibility for seven previously disparate City regulators in 1997.
Crucially the agenda is not just domestic. The FRC knows it will have to keep a close eye on Brussels, Washington and beyond if it is to succeed.
More than that, those at the top of the council know that if they can prove that they have created a model that works, it is one that is highly exportable.
Even America and continental Europe lack a regulatory structure that combines standard-setting with independent oversight and enforcement with investigation and discipline. All the FRC has to prove is that this approach is the right one.
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