The Financial Reporting Council (FRC) is to be replaced by a new regulator following a comprehensive review.
According to the report, published by the Department for Business, Energy & Industrial Strategy (BEIS), the new regulator – known as the Audit, Reporting and Governance Authority – will have a “new mandate, new leadership and stronger powers set down in law”.
The Government is taking action in response to the independent review led by Sir John Kingman, which addressed a number of shortcomings such as a lack of transparency and enforcement activity.
Under the new regulatory regime, there will also be greater sanctions available in cases of corporate failure, including new powers to “require rapid explanations from companies and in the most serious cases publish a report about the company’s conduct and management”.
The new regulator will likewise adopt a number of powers to directly enforce decisions, rather than applying to court to do so.
Notably, the new body will also be responsible for regulating the biggest audit firms directly, rather than those being delegated.
Commenting on the announcement, Secretary of State for Business, Energy and Industrial Strategy Greg Clark said: “This new body will build on our status as a great place to do business and will form an important part of strengthened public trust in businesses and the regulations that govern them.
“I am most grateful to Sir John Kingman for his work in this area. Taken together with the CMA’s market study and Sir Donald Brydon’s review of audit quality and effectiveness, they will enable us to deliver a major set of reforms on the regulation of company audit, accounting and reporting.”
For more information on the proposed changes, the consultation document can be read in full here.