SPA members may question the relevance of FRC to their working lives but we think we need to remember (and included these points in our submission):
- We are all subject to the Financial Reporting and Auditing Standards issued by the FRC
- We are all subject to the Professional Conduct and Disciplinary regimes of our professional bodies which are themselves supervised by the FRC
- We are all hugely embarrassed by the high profile criticisms of the work of the Big 4 and other large firms, which causes reputational damage to the perceived quality of our professional work and are similarly embarrassed by the recent public criticism of the FRC, as criticism of our regulator clearly reflects badly on our professional standing.
Our main points made to the review were:
- The mission, function and purpose of the FRC are all unclear
- The assumption that transparency and integrity in business can be delivered by audit regulation is simplistic and deeply flawed.
- The SME sector is not represented on any of the FRC’s boards or other organs (nor is it represented on the Kingman committee)
- There is unfairness in the way larger and smaller firms are treated in disciplinary matters.
- If directors are found to be at fault in the event of a corporate collapse, all directors, not just those with accountancy qualifications, should be subject to the same processes and sanctions.
- It seems probable that audit as currently defined in Company Law is no longer fit for purpose and should be replaced by a process which is more intelligent and forward-looking, with commensurate changes to the way it is regulated.
- If the independence of whatever body fulfills the FRC’s role in the future is paramount, the only way to achieve this is to recognise that it must act for the public benefit and be publicly funded. If it is to be funded by other stakeholders, then it must be accountable to those stakeholders, but this may make the perception of independence impossible to achieve.