LONDON, March 27 | Tue Mar 27, 2012 9:14am EDT
(Reuters) -
Britain is speeding up plans to streamline its cumbersome auditing and
corporate governance watchdog, giving it a bigger stick to rein in
rulebreakers and help shape European Union laws.
The shake-up at
the Financial Reporting Council (FRC) comes at a time when the audit
market is on the back foot over its role in the financial crisis.
The
FRC is a sprawling umbrella group covering a range of supervisory
activities from punishing auditors for rule breaches and checking up on
accountants and actuaries to promoting best practice in how companies
run themselves.
Its wide remit has often made it hard for the public to understand what it does.
"By
tightening its focus and streamlining its governance and structure, we
believe the FRC can be even more effective," UK business minister Norman
Lamb said in a statement on Tuesday.
Laws come into force on July 2 to give the FRC's board more powers, in particular to order bigger fines for poor quality audits.
It
was slammed for levying a 1.4 million pound ($2.2 million) fine on
auditor PricewaterhouseCoopers (PWC) earlier this year. Although it was a
record penalty from the watchdog, the sum is tiny compared with the
auditor's turnover.
The FRC said it will begin a public consultation shortly on levying bigger fines.
The accounting and auditing industry has given mixed reviews to the reforms at the FRC.
"We
recognise the need to streamline the operations of the FRC and believe
that these reforms will make the body a more effective regulator," PwC,
one of the world's "Big Four" auditing firms, said.
The ICAEW
accounting body in Britain said the challenge will be to show that the
revamped FRC can still champion high standards in an increasingly
international arena.
"This will be especially important at a time
when there are substantive reforms being considered in Brussels and
other markets around the world," the ICAEW said in a statement.
The
revamped watchdog would be able to conclude disciplinary hearings
against audit firms without a public hearing as it seeks to speed up
cases, some of which have gone on for years.
The FRC will regroup
around two core activities: a codes committee, to be chaired by Jim
Sutcliffe, and a conduct committee headed by Richard Fleck.
Both
cover all the FRC's existing work areas with, for example, the conduct
committee responsible for enforcement of corporate governance codes,
accounting standards, auditing practices and actuarial standards.
"The
reforms will simplify the FRC's over-complicated structure and enable
it to mobilise all the expertise in its operating bodies to strengthen
the UK voice in international debates on corporate governance and
reporting," FRC Chairwoman Baroness Hogg said.