We need to join the dots between Kingman + CMA
Over the last 30 years the Financial Reporting Council (FRC) has helped build a world-leading reputation for UK businesses and the audit profession.
But during this time the corporate landscape has changed beyond recognition and a string of recent corporate collapses have been viewed by many as symptomatic of a broken system.
When the consultation on the role of the FRC was announced, we viewed this as an opportunity to not only strengthen the UK’s governance code but also to transform the current regulatory environment based on evidence-led information.
We need a regulator that focuses on the wider stewardship and financial reporting of companies.
This is why, in our response to this review, we set out a reimagined vision for our regulator.
We believe engagement with Public Interest Entities (PIE) companies, auditors, and investors is key to the FRC’s future success, this is why our proposals for reform focus on establishing a new purpose, and centre around governance, people and funding.
For the capital markets to function properly, we need a regulator that looks at the bigger picture: with focus on the wider stewardship and financial reporting of companies.
The FRC needs to be the gatekeeper to the capital markets in the UK and be dogged in its pursuit to uphold public trust in business and the audit profession. It can only do this if it has the powers to take action against all directors of PIE companies, and not just the accountants.
The sequence of these events is an opportunity for a holistic review that has audit quality at its heart.
This week we will submit another response on the future of audit; this time to the Competition and Markets Authority (CMA). This consultation comes amid similar concerns that prompted the FRC review.
The sequence of these events is not only a chance for us to address the expectations gap that has emerged but also an opportunity for a holistic review of the corporate governance and corporate reporting framework that has audit quality at its heart.
We will not go far enough if we respond to these consultations in isolation. We need to join the dots between the FRC review, the CMA review and the future of assurance. If we do, we should see that the emergent question is: what is the purpose and scope of audit? Only when we answer this question will we be closer to rebuilding public trust in the system and securing the future of the profession.