Wednesday 11 September 2019 3:53 pm

Audit bigwigs say lack of timetable for reform of troubled regulator is 'a concern'

The heads of two leading audit bodies have expressed concern about perceived government inaction on the reform of the troubled accountancy regulator.

Chief executive of the Institute of Chartered Accountants in England and Wales, Michael Izza, said slow progress on the reform of the Financial Regulatory Council (FRC) “is something of a concern”.

Ian Peters, chief executive of the Chartered Institute of Internal Auditors, said: “We are very concerned about a potential delay given pressures on the parliamentary timetable.”

The FRC was slammed by Sir John Kingman in December in a report that called for the “rather ramshackle house” to be scrapped and replaced with a new body: the Audit, Reporting and Governance Authority (Arga).

Read more: Audit watchdog should be scrapped ‘as swiftly as possible’ says Legal & General chair

The department of Business, Energy and Industrial Strategy (Beis) hired a new chief executive for Arga – head of the HMRC Jon Thompson – and a new chair – former Glaxosmithkline boss Simon Dingemans – who are due to start this autumn. 

The FRC has also started implementing some of Kingman’s recommendations, but others require legislation and it is not clear when this might be enacted due to the political chaos around Brexit.

The Kingman report “created a situation where whether fairly or unfairly the independent regulator has had a sign hanging over its door saying that it is not fit for purpose,” Izza said.

“We’re pleased to see the appointment of a new CEO and chair of FRC; they make a strong team and we look forward to working with them.

“They are going to come in and stamp their own authority on the organisation but there will be things they need decisions on from the government.”

Former business secretary Greg Clark was a keen advocate for reform of the audit regulator, following its perceived toothlessness in the face of corporate scandals such as the failure of outsourcer Carillion.

Read more: Financial Reporting Council to be scrapped in shake-up of audit sector

However, the new secretary of state Andrea Leadsom has given little public indication of her thoughts on the subject.

“We hope that the new secretary of state Andrea Leadsom will be as committed to reform as her predecessor,” Izza said.

“Replacing the FRC with the new Audit, Reporting and Governance Authority must remain a key priority of the government in raising corporate governance standards,” Peters said.

A spokesperson for Beis said: “A strong and competitive audit market is crucial to our business framework, and we are committed to bringing forward reforms to ensure the UK continues to be a world leader in audit and accounting services.

“Work has already started to reform and bolster the regulator as a key part of this, and appointments for the new leadership team have already been made.”