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FRC doubles UK accountancy firm fines

FRC doubles UK accountancy firm fines

Highlights

  • British accountants are under more scrutiny after a number of high-profile scandals
  • The fines have undoubtedly seen a notable increase from the £13m handed out by the FRC during the 2017-18 financial year
  • The FRC is now set to be replaced with a new regulator and they are likely to bring in even more compliance changes

The accountancy industry has faced its fair share of change and challenges in recent years what with Brexit, GDPR, IR35 and Making Tax Digital (MTD), and it can often feel like staying on top of compliance changes has somehow become a full-time job.

Compliance changes are disruptive and demanding on all resources and there is always a period of education and change.

And things don’t always go well either as the Financial Reporting Council (FRC) found last year that there had been a decline in quality across the ‘big four’ auditors – Deloitte, EY, KPMG and PwC.

Certainly, British accountants are under more scrutiny after a number of high-profile scandals involving some of the UK’s best-known companies including Tesco, BHS, Rolls Royce, Carillion, Conviviality (Bargain Booze) and Patisserie Valerie.

However, the recent news that penalties against the accountants have increased by more than double. Fine amounting to £32m last year has shocked many in the industry with some believing it is an obvious attempt by the Financial Reporting Council (FRC) to rebuild its reputation after the Carillion’s collapse.

The news does come after the House of Commons Business, Energy and Industrial Strategy Committee called for the ‘big four’ accountants to be broken up to improve competition in the sector and increase public trust in the quality of companies’ accounts.

The fines have undoubtedly seen a notable increase from the £13m handed out by the FRC during the 2017-18 financial year but would have been even higher, £42.9m in the March 2019, if those fined hadn’t received discounts by volunteering to settle their cases early.

In response to the news, the FRC said the increase in fines past year was partially due to the number of cases coming to an end over the period, along with the rise in serious misconduct by accountants and the size of the auditing firms involved stating that the ‘big four’ KPMG, Deloitte, PwC accounted for six of the nine fines imposed.

The FRC’s executive counsel, Elizabeth Barrett, said: “The clarity and accuracy of financial reporting is of critical importance to us all. The significant increase in the number, range and severity of sanctions sends a clear message that where behaviour falls short of what is required, we will hold those responsible to account.”

The FRC itself has received its fair share of criticism with many concerned they have allowed the situation of several high-profile corporate collapses to happen and some have even gone as far to say the FRC are “useless and toothless” and has failed to keep close enough tabs on the industry.

The FRC is now set to be replaced with a new regulator and they are likely to bring in even more compliance changes which can only add to the burden facing accounting practices all over the UK.

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