Audit watchdog the Financial Reporting Council (FRC) today announced plans to create a “more forceful regulator”.
The FRC has been heavily criticised for the slow pace of its investigations into matters such as the audit of Hbos shortly before its collapse.
It has also been criticised for its perceived toothlessness and its cosy relationship with the Big Four accounting firms: EY, KPMG, Deloitte and PwC.
Last year the government announced the FRC would be replaced with a new body, the Audit, Reporting and Governance Authority (ARGA).
The decision followed a report by Sir John Kingman who said the FRC was “an institution constructed in a different era – a rather ramshackle house, cobbled together with all sorts of extensions over time.”
Today the FRC said it would hire over 100 additional employees and streamline its decision making process.
It said it aimed to speed up the investigation and conclusion of its enforcement cases.
The watchdog said it would hire more lawyers and forensic accountants and strengthen its case examination function to fast-track decisions on whether to open a case.
The FRC said it would increase its number of audit quality and corporate reporting reviews by 25 per cent.
It also said audit firm monitoring will be expanded from the Big Four to challenger firms.
To fund the expansion, its industry levy will increase from £41.7m to £47.2m.
Sir Jonathan Thompson FRC chief executive said: “The strategy builds a bolder, more forceful regulator that will act with pace in supervising and holding companies to account.
“Ahead of the FRC’s transition into the Audit, Reporting and Governance Authority I am determined we use our powers to the fullest, to respond to corporate governance challenges.”
Julie Matheson, a partner at law firm Kingsley Napley, said: “The FRC’s draft strategy for 2020 demonstrates its drive to bolster its regulatory bite, on the background of the recommendations made in the Kingman report.
“The FRC has been criticised in the past for the speed of its investigations – employing 100 more staff is a significant step in seeking to address this.
“The proposed reorganisation of the FRC to encompass separate ‘supervision’ and ‘enforcement’ divisions is akin to the FCA’s approach and will naturally lead to audit firms being further subject to the FRC spotlight.”