Sunday 15 December 2019 4:54 pm

Accounting watchdog 'plots sweeping rule changes' for company executives

The Financial Reporting Council (FRC) is lining up significant changes to corporate governance rules after a string of scandals at Patisserie Valerie, M&C Saatchi and Ted Baker.

It is understood the accounting regulator is writing a British version of an American law passed in 2002 after Worldcom and Enron collapsed.

Read more: FRC watchdog probes EY audit of Thomas Cook accounts

Such a move would place the onus on directors to vouch for their financial controls, in a bid to give them more responsibility after numerous accounting scandals in recent years.

If it was passed into law in the UK, it would also open the door to potential criminal proceedings against bosses if they reported misleading statements to markets.

The FRC will likely accelerate its efforts to bring the measures in now the election is out of the way.

The suggestion is just one of many recommendations made by Sir John Kingman in a wide-ranging review of the body earlier this year.

The news was first reported by the Sunday Times.

In tandem, accounting firms are facing the potential of being separated into their audit and advisory businesses to remove the potential for conflicts of interest.

Roughly one-in-four FTSE 100 companies already follow the model set by the US law, called Sarbanes-Oxley.

This is because they have exposure to US markets, where it is mandatory.

Read more: Audit watchdog could push for clawback of audit partners’ bonuses after poor quality work

Should the standard come into law in the UK it could present the remaining three quarters with a financial hit in implementing it.

The FRC, which declined to comment, is chaired by former finance boss at Glaxo Smith Kline Simon Digemans.