Improving the focus, efficiency and influence of the UK’s corporate governance and accounting regulator
The Financial Reporting Council and the Government today announced proposals to reform the FRC. The accompanying press release is here, and a detailed document setting out the FRC’s future structure and regulatory procedures is here.
These proposals are the outcome of a consultation launched in October 2011 that we reported on in this post.
The proposals involve a new structure which makes the FRC Board (and not, as at present, to its various individual operating bodies) accountable for almost all of the FRC’s statutory activities. Specifically, the Board will:
- Set and amend UK corporate governance, accounting, audit and actuarial standards.
- Maintain the effectiveness of the UK Corporate Governance and Stewardship Codes.
- Set the annual plan and budget for the FRC and oversee its executive.
“As much standard-setting is conducted at international level, the Board will oversee the FRC’s international work with appropriate members playing a significant role in representing it as the UK standard-setter at major national standard-setting and similar senior meetings. As European developments in corporate reporting and governance are likely to be of particular importance, the FRC will ensure that, where possible, it is appropriately represented on key decision making and influencing bodies.”
The Board will be supported by two committees:
- The Codes and Standards Committee will be responsible for advising the Board on maintaining an effective framework of UK codes and standards and influencing the wider regulatory framework. The Board and this Committee will be advised by the “Councils” on accounting, audit and assurance, and actuarial matters.
- The Conduct Committee will be responsible for overseeing the FRC’s conduct work aimed at promoting high quality corporate reporting. The power to apply to the court in respect of defective reports or accounts will be delegated to this Committee, which will also set strategic goals for the FRC’s supervisory, monitoring and disciplinary work, including by identifying the main areas of risk that need to be addressed. It will also monitor the progress of disciplinary activities.
Section 2 of the future structure and regulatory procedures document contains charts of this structure and sets out the responsibilities of these committees.
Oversight and disciplinary activities
The FRC Board will be responsible for recognising and regulating the various professional accounting bodies, including the Institute of Chartered Accountants in England and Wales, and the FRC will continue to investigate potential acts of misconduct by accountants, actuaries and accountancy firms where public interest criteria are met.
The oversight and disciplinary functions of the FRC are set in sections 4 and 7 of the future structure and regulatory procedures document.
Where secondary legislation is required to implement these changes, it is intended that that legislation will enter into force on 2 July 2012.
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