According to its website, the FRC ‘regulates auditors, accountants and actuaries. Sets the UK’s corporate governance and stewardship goals and promotes transparency and integrity in business.’ Going from its recent activities though it might be fairer to say that it ‘promotes opacity where clarity might lead to censor’. Consider. Last June it cleared PWC over the Tesco accounting scandal. The Tesco group lost £326 million over the affair but PWC, its auditor, was found to have done nothing wrong. In August, it cleared KPMG over its audit of HBOS during the financial crisis. KPMG had given the bank a clean bill of health in February 2008, only eight months before it collapsed. In September it cleared PWC again, this time over its checks on Barclays. The bank was fined £38 million for mixing up client money with its own, yet PWC had repeatedly signed off reports saying that it was complying with client asset rules.
There are serious concerns that the structure of the FRC mitigates against it being neutral and unbiased. At least 34 present or former Big Four partners sit on its main board or on senior committees. When the latest exoneration of PWC took place, three out of fifteen directors on the main FRC board were former PWC partners and another seven sat on various FRC committees. Should we laugh or should we cry?
The above is the lead article in our latest monthly News Notes – December 2017. Other topics in this edition include:
- Equity Release
- Ticking Time Bomb
- MiFID II Implementation
Haven Risk Management : FCA Compliance Consultants