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The Financial Reporting Council (FRC) is an independent regulator in the UK and
Ireland Ireland ( ; ga, Éire ; Ulster Scots dialect, Ulster-Scots: ) is an island in the Atlantic Ocean, North Atlantic Ocean, in Northwestern Europe, north-western Europe. It is separated from Great Britain to its east by the North Channel (Grea ...
based in
London Wall The London Wall was a defensive wall first built by the Romans around the strategically important port town of Londinium in AD 200, and is now the name of a modern street in the City of London. It has origins as an initial mound wall and di ...
in the
City of London The City of London is a city, ceremonial county and local government district that contains the historic centre and constitutes, alongside Canary Wharf, the primary central business district (CBD) of London. It constituted most of London f ...
, responsible for regulating auditors, accountants and actuaries, and setting the UK's
Corporate Governance Corporate governance is defined, described or delineated in diverse ways, depending on the writer's purpose. Writers focused on a disciplinary interest or context (such as accounting, finance, law, or management) often adopt narrow definitions ...
and
Stewardship Code The Stewardship Code is a part of UK company law concerning principles that institutional investors are expected to follow. It was first released in 2010 by the Financial Reporting Council ('FRC'), and in 2019 the FRC released an updated edition of ...
s. The FRC seeks to promote transparency and integrity in business by aiming its work at investors and others who rely on company reports, audits and high-quality risk management. In December 2018, an independent review of the FRC, led by Sir John Kingman, recommended its replacement by a new Audit, Reporting and Governance Authority, a recommendation followed by the government in March 2019. Ireland adopted the FRC's auditing framework in 2017.


Structure

The FRC is a
company limited by guarantee In British, Australian, Bermudian, Hong Kong and Irish company law (and previously New Zealand), a company limited by guarantee (CLG) is a type of corporation used primarily (but not exclusively) for non-profit organisations that require legal pe ...
, and is funded by the audit profession, who are required to contribute under the provisions of the
Companies Act 2006 The Companies Act 2006 (c 46) is an Act of the Parliament of the United Kingdom which forms the primary source of UK company law. The Act was brought into force in stages, with the final provision being commenced on 1 October 2009. It largel ...
and by other groups subject to, or benefitting from FRC regulation. Its board of directors is appointed by the Secretary of State for Business, Energy and Industrial Strategy. It and its subsidiaries play crucial roles in the oversight and development of
corporate governance Corporate governance is defined, described or delineated in diverse ways, depending on the writer's purpose. Writers focused on a disciplinary interest or context (such as accounting, finance, law, or management) often adopt narrow definitions ...
standards in the UK and the Republic of Ireland, such as the UK Corporate Governance Code and standards for the accounting industry. The FRC board is supported by three governance committees, two business committees, and three advisory councils.


Governance committees

* Audit Committee * Nominations Committee * Remuneration Committee


Business committees

* Codes & Standards Committee - advises the FRC board on corporate governance matters, including changes to the UK Corporate Governance Code and the Stewardship Code. It also advises the FRC Board on the Annual Plan and Budget and FRC strategy. * Conduct Committee - responsible for overseeing the FRC's work in promoting high quality corporate reporting. Its responsibilities include overseeing: the monitoring of recognised Supervisory and Recognised Qualifying Bodies; audit quality reviews; Corporate reporting reviews; Professional discipline; and the regulation of accountants and actuaries. The Conduct Committee is supported by three further Committees, members of whom, including the Chairs, sit on the Conduct Committee: ** the Case Management Committee, whose functions include monitoring and providing oversight in respect of enforcement investigations and tribunal proceedings; ** the Audit Quality Review Committee; and ** the Corporate Reporting Review Committee, which ensures the consistency and quality of the FRC's monitoring work.


Advisory councils

* Corporate Reporting - advises the FRC Executive on the development and maintenance of high quality, effective and proportionate Standards, Guidance, SORPS and Practice Notes for accounting and narrative reporting work. Accounting standards apply to all companies, and other entities that prepare accounts that are intended to provide a true and fair view. * Audit & Assurance - as above, but for audit and assurance work. * Actuarial - as above, but for technical actuarial work.


Former structure

The FRC used to incorporate six operating bodies:


Accounting Standards Board

The role of the Accounting Standards Board (ASB) was to issue accounting standards in the United Kingdom and was recognised for that purpose under the
Companies Act 1985 The Companies Act 1985 (c. 6) is an Act of the Parliament of the United Kingdom of Great Britain and Northern Ireland, enacted in 1985, which enabled companies to be formed by registration, and set out the responsibilities of companies, their ...
. It took over the task of setting accounting standards from the
Accounting Standards Committee Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations. Accounting, which has been called the "language ...
(ASC) in 1990. However, ASB was overtaken by the Financial Reporting Council (FRC) on 2 July 2012. Thus, FRC is now the authority that may issue accounting standards in the UK.


Financial Reporting Review Panel

The Financial Reporting Review Panel (FRRP) was established in 1990 as a subsidiary of the United Kingdom's Financial Reporting Council. The FRRP sought to ensure that the provision of financial information by public and large private companies complied with relevant accounting requirements such as the
Companies Act 1985 The Companies Act 1985 (c. 6) is an Act of the Parliament of the United Kingdom of Great Britain and Northern Ireland, enacted in 1985, which enabled companies to be formed by registration, and set out the responsibilities of companies, their ...
.


Accountancy & Actuarial Discipline Board

The Accountancy & Actuarial Discipline Board (AADB) was the independent, investigative and disciplinary body for accountants and actuaries in the United Kingdom. The AADB was formerly known as the Accountancy Investigation & Discipline Board (AIDB) and changed its name to the AADB on 16 August 2007. The AADB Scheme established the framework and set in place the legal formalities of participation between the AADB and the Participating Accountancy Bodies i.e. the
Institute of Chartered Accountants in England and Wales The Institute of Chartered Accountants in England and Wales (ICAEW) is a professional membership organisation that promotes, develops and supports chartered accountants and students around the world. As of July 2022, it has over 198,000 members ...
(ICAEW), the Association of Chartered Certified Accountants (ACCA), the Chartered Institute of Management Accountants (CIMA), and the Chartered Institute of Public Finance and Accountancy (CIPFA), The Institute of Chartered Accountants of Ireland, and the Institute of Chartered Accountants of Scotland. the AADB had a substantial workload including investigations into the conduct of professional firms, such as EY, that had advised
Lehman Brothers Lehman Brothers Holdings Inc. ( ) was an American global financial services firm founded in 1847. Before filing for bankruptcy in 2008, Lehman was the fourth-largest investment bank in the United States (behind Goldman Sachs, Morgan Stanley, a ...
, JPMorgan, Connaught, Aero Inventory, and BAE Systems.


Professional Oversight Board

The Professional Oversight Board (POB) was a
regulatory Regulation is the management of complex systems according to a set of rules and trends. In systems theory, these types of rules exist in various fields of biology and society, but the term has slightly different meanings according to context. Fo ...
body specialising in the accounting, auditing, and actuarial
profession A profession is a field of Work (human activity), work that has been successfully ''professionalized''. It can be defined as a disciplined group of individuals, ''Professional, professionals'', who adhere to ethical standards and who hold the ...
s in the United Kingdom. It was a part of the Financial Reporting Council (FRC), the independent regulator of
corporate governance Corporate governance is defined, described or delineated in diverse ways, depending on the writer's purpose. Writers focused on a disciplinary interest or context (such as accounting, finance, law, or management) often adopt narrow definitions ...
and reporting in the UK. The Board's stated purpose was to support the FRC's goal of
investor An investor is a person who allocates financial capital with the expectation of a future Return on capital, return (profit) or to gain an advantage (interest). Through this allocated capital most of the time the investor purchases some specie ...
and public confidence in the financial governance of business organisations. The Board provides assurance that professional accountancy bodies are properly setting standards and enforcing
discipline Discipline refers to rule following behavior, to regulate, order, control and authority. It may also refer to punishment. Discipline is used to create habits, routines, and automatic mechanisms such as blind obedience. It may be inflicted on ot ...
for their members, in accordance with the
Companies Act 2006 The Companies Act 2006 (c 46) is an Act of the Parliament of the United Kingdom which forms the primary source of UK company law. The Act was brought into force in stages, with the final provision being commenced on 1 October 2009. It largel ...
and other statutory requirements. The POB carried out inspections on behalf of the FRC, but if any shortcomings were found, sanctions could only be imposed by the professional bodies.Licensed to audit?
'' Accountancy Age'', 13 May 2011
The POB did not have the power either to overturn any decision which the body has made in a case or to direct how the body should handle a case. The Board also operated an Audit Inspection Unit (AIU) that oversees auditing organisations and makes recommendations for appropriate regulatory actions by governmental and professional authorities. As part of its oversight of the actuarial profession, the Board monitored the activities of actuarial organisations with regard to the
education Education is a purposeful activity directed at achieving certain aims, such as transmitting knowledge or fostering skills and character traits. These aims may include the development of understanding, rationality, kindness, and honesty. ...
, discipline,
ethical Ethics or moral philosophy is a branch of philosophy that "involves systematizing, defending, and recommending concepts of morality, right and wrong action (philosophy), behavior".''Internet Encyclopedia of Philosophy'' The field of ethics, alo ...
standards and continuing
professional development Professional development is learning to earn or maintain professional credentials such as academic degrees to formal coursework, attending conferences, and informal learning opportunities situated in practice. It has been described as intensiv ...
of their members. The Board also sought to provide a framework for the evaluation of the quality and effectiveness of actuarial work. Before 5 May 2006, the Board was known as the Professional Oversight Board for Accountancy. The name change reflected the Board's additional responsibility for oversight of the actuarial profession from that date. In 2011, the Board published information for the first time about shortcomings in self-regulation by particular institutes. Press reports highlighted comments about ACCA, which had implemented recommendations to improve its examination syllabus, but needed to pay greater attention to continuing monitoring of members who had registered as auditors some years ago. The board contains member from a wide range of background. As of 2011 Paul George is its director, and John kellas is interim chair following the death of Dame Barbara Mills.


Auditing Practices Board

The Auditing Practices Board Limited (APB) was originally established in 1991 as a committee of the Consultative Committee of Accountancy Bodies, to take responsibility within both
Ireland Ireland ( ; ga, Éire ; Ulster Scots dialect, Ulster-Scots: ) is an island in the Atlantic Ocean, North Atlantic Ocean, in Northwestern Europe, north-western Europe. It is separated from Great Britain to its east by the North Channel (Grea ...
and the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the European mainland, continental mainland. It comprises England, Scotlan ...
for setting standards of auditing with the objective of enhancing public confidence in the audit process and the quality and relevance of audit services in the public interest. In 2002 APB was re-established under the auspices of
The Accountancy Foundation ''The'' () is a grammatical article in English, denoting persons or things that are already or about to be mentioned, under discussion, implied or otherwise presumed familiar to listeners, readers, or speakers. It is the definite article in En ...
and, following a UK government review, it has been transferred to the Financial Reporting Council (FRC). Its objective has remained the same, but its remit has been extended to include responsibility for setting standards for auditors' integrity, objectivity and independence.


Board for Actuarial Standards

Following the Morris Review of the Actuarial Profession, published in March 2005, HM Treasury asked the Financial Reporting Council (FRC) to take on responsibility for oversight of the regulation of actuaries by the Institute and Faculty of Actuaries (IFoA) and the independent setting of technical actuarial standards. This latter task was the remit of the Board for Actuarial Standards until 2 July 2012 when responsibility was assumed by the FRC.


Senior personnel

Sir Winfried Bischoff Sir Winfried Franz Wilhelm "Win" Bischoff (born 10 May 1941) is an Anglo-German banker and former chairman of Lloyds Banking Group. He previously served as chairman and interim CEO of Citigroup in 2007. He was succeeded as CEO by Vikram Pandit on 11 ...
was the Chairman of the FRC, between 2014 and 2019. Other board members included Gay Huey Evans, Melanie McLaren and Paul George. The FRC's chief executive from November 2009 until announcing he was stepping down in late 2018, was
Stephen Haddrill Stephen Haddrill was chief executive officer of the Financial Reporting Council (FRC) in the United Kingdom. In November 2018 he announced he would be leaving the post. Biography Educated at Trinity School of John Whitgift from 1967 to 1974, Had ...
. In 2019, Simon Dingemans and
Sir Jon Thompson Sir Jonathan Michael Thompson, is a British civil servant who served as the Permanent Secretary of the Ministry of Defence (MOD) from September 2012 until April 2016, when he succeeded Dame Lin Homer as Permanent Secretary and Chief Executive o ...
took over as chair and CEO respectively. ''
Private Eye ''Private Eye'' is a British fortnightly satirical and current affairs news magazine, founded in 1961. It is published in London and has been edited by Ian Hislop since 1986. The publication is widely recognised for its prominent criticism ...
'' reported that during the appointment process, Simon Dingemans did not declare an interest in a company which was late filing accounts. In May 2020, Dingemans resigned, citing conflicts between the part-time role and other positions he was interested in taking. In December 2021, Jan du Plessis was nominated by the UK Government to lead the FRC through its transformation into the Audit, Reporting and Governance Authority. In February 2022, du Plessis was confirmed as the FRC's new chair.


Controversies


Carillion

Following the January 2018 collapse of construction and services business Carillion, it was reported that Carillion's auditor KPMG would have its role examined by the FRC. Two months later, the FRC's conduct committee announced an investigation into the conduct of former Carillion finance directors Richard Adam and Zafar Khan. The operations of the FRC itself were also to be scrutinised by an independent inquiry ordered by Business Secretary
Greg Clark Gregory David Clark (born 28 August 1967) is a British politician who served as Secretary of State for Levelling Up, Housing and Communities from 7 July 2022 to 6 September 2022. A member of the Conservative Party, he has served as Member of ...
. An "excoriating" report by the Business and the Work and Pensions Select Committees into the collapse of Carillion, published on 16 May 2018, was critical of the FRC, describing it as feeble and timid, and of failing to follow up concerns in Carillion's 2015 accounts. Along with
The Pensions Regulator The Pensions Regulator (TPR) is a non-departmental public body which regulates work-based pension schemes in the United Kingdom. Created under the Pensions Act 2004, the regulator replaced the Occupational Pensions Regulatory Authority (OPRA) fr ...
, it was branded as "chronically passive". Welcoming the Government's review of the FRC's powers and effectiveness, the report said changes to be a more aggressive and proactive regulator "will require a significant shift in culture at the FRC itself". Still under pressure to improve, in October 2018, the FRC proposed reforms, including banning from earning consultancy fees at businesses they audit, to tackle the "underlying falling trust in business and the effectiveness of audit," and severely rebuked KPMG. In July 2020, the FRC told the Big Four that they must submit plans by October 2020 to separate their audit and consultancy operations by 2024. Meanwhile, in November 2018, it was announced that Stephen Haddrill, CEO of the FRC, was to quit, amid suggestions that his departure might lead to the body's abolition.


FRC replacement

In March 2019, the government announced that the FRC would be replaced by a new regulator, the Audit, Reporting and Governance Authority (ARGA), with enhanced powers, in an effort to "change the culture" of the accounting sector. Plans for the new regulator were included in the September 2019 Queen's Speech and, despite concerns that the launch of ARGA might be delayed, the Department for Business, Enterprise and Industrial Strategy (BEIS) told ''Accountancy Daily'' in February 2020 that "next steps on audit reform" would be taken in the first quarter of 2020. However, further details were slow to emerge; in November 2020 '' City A.M.'' reported that reform proposals relating to the audit sector were expected in early 2021 with full implementation expected in 2023. A UK Government policy paper, ''Restoring trust in audit and corporate governance'', was published on 19 March 2021, consulting on its proposed steps to establish the ARGA and give it the formal duties, functions and powers it needs to be fully effective. In September 2021, the FRC's head of regulatory standards, Mark Babington said the ARGA would "commence in April 2023".


See also

*
UK company law The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary lega ...
* UK Corporate Governance Code *
Stewardship Code The Stewardship Code is a part of UK company law concerning principles that institutional investors are expected to follow. It was first released in 2010 by the Financial Reporting Council ('FRC'), and in 2019 the FRC released an updated edition of ...


References


External links


Official siteFRC structure
{{authority control Accounting in the United Kingdom Accounting organizations Government oversight and watchdog organizations Corporate governance in the United Kingdom Financial reporting 1990 establishments in the United Kingdom Government agencies established in 1990 Public bodies and task forces of the United Kingdom government Financial regulatory authorities of the United Kingdom Accounting in Ireland