ICAS sets out vision for a refreshed FRC
ICAS has set out its vision for the Financial Reporting Council (or a successor body), centred around establishing a new core purpose to generate enhanced public trust in Public Interest Entities (PIE) and the audit profession.
We believe building a strong framework which engages PIE companies, auditors, and investors to achieve the highest quality of corporate governance, is key to the FRC’s future success.
Our proposals for the future reform of the FRC focus on its new Purpose, Governance, People and Funding. A summary of our response to the Independent Review of the Financial Reporting Council is set out below.
New purpose
We propose that the roles, responsibilities and resources of the FRC should be focused around four key activities:
- Corporate Governance
- Financial Reporting
- PIE Audit Regulation
- PIE Director Enforcement
Governance
To support a refreshed FRC, the governance arrangements should be simplified and enhanced. A wider governance framework, which includes new advisory boards, would enable the FRC to have access to the most current and relevant expertise, without compromising its executive functions. Fuller transparency, accountability and oversight should be a regulatory priority.
People and funding
To carry out this role, the FRC will need a broader funding model and attract and recruit the right skills, as well as ensure that it is financially independent from the accountancy bodies and those it regulates.
Beyond the FRC review
As the gatekeeper to the capital markets in the UK, the independent review of the FRC, led by Sir John Kingman, will be a key component of any future reforms, and will be critical to ensuring a balanced and credible outcome.
The review of the FRC, as well as the current CMA market study, should not be considered in isolation. By working together, companies, auditors, investors, government, regulators and the profession have an opportunity to join the dots. There is a much wider debate to be had over the purpose of audit and audit quality, as well as market choice. There is one common thread: Public Trust.