ICAS calls for regulator name change
ICAS has responded to the initial BEIS consultation on the first wave of proposed reforms to the Financial Reporting Council (FRC). ICAS is very supportive of many of the proposed reforms. Indeed, we made many similar suggestions in our response to the Independent Review undertaken by Sir John Kingman.
Much of this latest consultation was concerned with the quick wins, such as clarifying the objectives and future governance arrangements of the new regulator, but one of the finer details seems to have been overlooked. What should the new regulator be called?
The Independent Review suggested that it should be called the Audit, Reporting and Governance Authority. “ARGA” for short. No one seems to have challenged that proposal.
In our response to BEIS, ICAS has called for the name of the new regulatory body to reflect the role that each component part plays in the corporate reporting eco-system. Audit is not the primary component of this system, nor is it the most important.
The name ARGA places audit, reporting and governance in the wrong sequence, and distorts the natural order of the framework. This might seem like a subtle point to make against the background of all the other regulatory reforms facing our profession, but I firmly believe it is an important one and is in the public interest. Words have meaning and names have power.
The proposed name may exacerbate the expectation gap.
The name of the new Regulator needs to more accurately reflect, and reinforce, the actual sequencing of corporate governance, corporate reporting and audit.
ICAS has proposed two possible alternatives for BEIS to consider. The Governance, Reporting and Audit Authority (GRAA), or the Authority for Governance, Reporting and Audit (AGRA).
Many of the other key recommendations of the Independent Review will require more detailed consultations.
We welcome the BEIS proposal to consult separately on the future of PIE regulation, enforcement and funding. We consider that these issues will require more careful consideration.
Moreover, it will be important for BEIS to consider some of the recommendations alongside whatever it decides in relation to the Competition and Market Authority's recent proposals and also those from the current Brydon Review, to ensure that they are complementary, and to minimise unintended consequences.