Britain to set up new watchdog to police auditors

Carillion

11/03/2019 18:52

By Huw Jones
    March 11 (Reuters) - Britain will create a new regulator to
police accountants who check the books of companies in response
to collapses at construction firm Carillion and retailer BHS
that triggered calls for root-and-branch reform of the audit
sector its supervision.
    Business minister Greg Clark said on Monday a new, more
powerful regulator would replace the Financial Reporting Council
(FRC), criticised by lawmakers for being "timid" in its handling
of accountants and too close to the "Big Four" accounting firms
that dominate auditing - PwC, KPMG, Deloitte and EY.
    "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 business and the regulations that govern them,"
Clark said in a statement.
    He was responding to recommendations from an independent
review by John Kingman to scrap what it called the "creaky" FRC
and create a new Audit, Reporting and Governance Authority
(ARGA).
    Clark, who published a consultation paper on implementing
the Kingman review on Monday, said the setting up of new
leadership at the top of the FRC, which will transition into the
new authority, would begin shortly with the recruitment process
for chair and deputy chair.
    The new watchdog will for the first time have powers to make
direct changes to accounts rather than apply to a court to do
so. It will have duties to protect the interests of customers
and the public, and regulate the biggest audit firms directly.
    There will also be tougher sanctions in cases of corporate
failure, including powers to require "rapid explanations" from
companies and in the most serious cases, publish a report about
the company's conduct and management.
    The Investment Association, which represents asset manager
that invest in companies, said it was vital the new regulator
was established as soon as possible and properly reflected the
voice of investors.
    Britain's Competition and Markets Authority (CMA) has
proposed shaking up the audit market by requiring the top 350
listed companies in Britain to have two auditors, one of them
not from among the Big Four, in order to improve standards. 
    Legislation will be needed to implement some of the Kingman
and CMA reforms, and Clark is due to be quizzed by lawmakers on
Wednesday on when he proposes bringing a draft law before a
parliament clogged with business related to Britain's departure
from the European Union.

 (Reporting by Huw Jones; Editing by Mark Potter)
 ((huw.jones@thomsonreuters.com ; +44 207 542 3326; Reuters
Messaging: huw.jones.thomsonreuters.com@reuters.net))