The U.K.’s accounting watchdog is toughening up the regulation of Britain’s biggest audit firms, as the sector faces heavy criticism over a string of high-profile finance scandals.
The Financial Reporting Council said Thursday it’s seeking feedback on beefed-up powers to take over the registration of the auditors of so-called public interest entities. The consultation runs until May 26.
The agency said it currently has insufficient muscle to address “systemic issues” and must rely on the registration powers from professional bodies, which also represent the industry. The proposals will allow it to impose conditions, suspensions and remove registrations.
“Having direct responsibility for registering and monitoring PIE auditors will allow the FRC to act more quickly and effectively when systemic issues are identified in these audits,” said Sarah Rapson, executive director of supervision at the FRC.
The changes come as the regulator has faced backlash over its failure to regulate the likes of PricewaterhouseCoopers, KPMG, Deloitte and Ernst & Young over their involvement in a number of accounting scandals and company collapses including British construction company Carillion Plc and food chain Patisserie Valerie.
The planned crackdown comes a day after the agency announced a new code of conduct, clarifying the need for separation between the role of board chair from the senior partner running the business. It also set out the importance of long-term sustainability, culture and employee engagement.
The watchdog is bolstering its powers as it waits for lawmakers to pass legislation to replace it with a new regulator. Earlier, the FRC said it planned to increase funding and staffing by around 16% in both 2022 and 2023.
