The accountancy regulator, the Financial Reporting Council (FRC), will gain new powers in June 2016 as it works alongside the FCA, the PRA and professional bodies to implement the EU Auditing Regulations and Directive (overview available here).
From 17 June 2016, the FRC's role will expand to cover audits of all public interest entities (PIEs), being entities which are listed on an EU regulated market, and will also include unlisted banks, building societies and insurance companies above a certain size.
At an event organised by the Financial Services Lawyers Association (FSLA), entitled "Trends in Enforcement", as a member of the speaking panel, Gareth Rees, Executive Counsel of the FRC, explained the FRC will have new statutory powers enabling it when investigating audits of PIEs to approach third parties directly for information, including any person (not just regulated persons) within the PIE. This includes the power to interview. The new statutory powers will mean the FRC will no longer depend upon information statutory gateways to obtain information from other regulators about audits of PIE's it is investigating.
It was also mentioned by Mr Rees that the need to prove "misconduct" might be replaced with a requirement to prove "contravention of relevant requirements".
A move away from findings of misconduct to "contravention of relevant requirements" is potentially to be welcomed by the profession. Standards must be maintained and enforced, but not every departure from standards should bear the stigma of a finding of misconduct. It may prove more practical and cost effective to enforce standards where regulatory findings of departures from standards do not bear the stigma of a finding of misconduct. Furthermore, successful regulation is of course more than simply the accumulation of "scalps".
Stephen Haddrill, the FRC's Chief Executive, was reported commenting on the changes in a recent City A.M. article. He emphasised that the FRC has sought to achieve a new forward-looking focus, a shift away from corporate reporting through a rear-view mirror, looking at what happened last year.
There has been very little reported in the press about the FRC's increased powers and we will be closely monitoring announcements over the coming months with interest.