In view of Brexit that is likely to become a reality by end of this month the UK government has announced that the existing Financial Reporting Council will be replaced with new regulator called Audit Reporting and Governance Authority that will have greater powers and can make changes to accounts directly without applying to court. The government stated that these changes were being made to ensure strong leadership and change existing culture of accounting sector. Britain’s MP’s have however criticized the collapse of Carillion and role of KPMG in it as the reason for this change.
MP’s want to know how reputed accounting firms like KPMG and other four top ones failed to identify red flags in the financial audits that they were carrying out of large UK businesses just before they collapsed. The resulting public outcry and led to Competition and Markets Authority proposing major changes in the industry for which it called leaders of the top four accounting firms for a committee meeting that was attended by MP’s of Business Energy and Industrial Strategy during last month. The watchdog of accounting industry also came under fire for failing to address recent corporate collapses strongly.
Last year during November Stephen Haddrill of FRC had announced his intention to step down due to government’s review of council’s role. The new regulator has been designed as per review led by Sir John Kingman and will have powers to carry out actions like Regulate large audit firms, Impose sanctions in instances of corporate failures, Insist on quick explanations from corporates, Publish reports about conduct and management of companies.
Sir Win Bischoff, FRC’s chair welcomed the new consultation and stated that speedy implementation of these recommendations will help to restore public confidence in government machinery and that the committee will speed up on implementing the agreed proposals at the earliest.