The boss of the Financial Reporting Council (FRC) has admitted the audit regulator was asleep at the wheel following large scale business collapses that shook confidence in the sector.
Sir Jon Thompson, chief executive of the FRC, said he agreed with criticism of the regulator following the collapse of Carillion and Patisserie Valerie.
Speaking to the Financial Times, and when asked if the regulator was “asleep at the wheel” during corporate failures, Thompson said: “The answer is yes. Let’s be straight forward about it.”
He later added: “Were we complicit or in some way responsible for corporate failures? Well, it’s probably arguable that as a regulator we weren’t anywhere near as strong enough, we weren’t big enough, and we weren’t transparent enough to make a difference to the system.”
The FRC has faced criticism over the years for being a toothless regulator, and allegations that it operates in a way that is too close to those it is supposed to regulate.
Thompson also said the 2018 Kingman Review was generous in its findings, which at the time described the FRC as “an institution constructed in a different era – a rather ramshackle house, cobbled together with all sorts of extensions over time.”
The government recently launched a consultation on how to improve the audit sector and the public’s trust in auditors, which included the creation of the Audit, Reporting and Governance Authority (ARGA), a beefed-up regulator that will replace the FRC and be led by Thompson.
However, the chief executive told the Financial Times ARGA was not expected to be in place until 2023, which in turn would delay the implementation of some audit reforms.