The U.K. is ramping up oversight of corporate reporting as it expands the size of its Financial Reporting Council (FRC), according to news from The Financial Times on Sunday (Dec. 3).
Reports said the U.K.’s FRC has more than tripled the size of its enforcement team over the last five years in the wake of criticism over how it has handled allegations of misconduct across the corporate auditing market. That criticism heightened after the Financial Reporting Council decided to clear KPMG — one of the nation’s Big Four auditors — of wrongdoing after probing KMPG’s conduct in working with failed lender HBOS. KPMG gave the lender “a clean bill of health,” the publication said, just a few months before its collapse in 2008.
The FRC’s enforcement team was comprised of fewer than 10 employees in 2012; now, the team employs 30. Much of that expansion is the result of the watchdog’s establishment of an internal forensic unit, while it also ramped up its legal team.
“The advantage is we can really start an investigation on day one, without having to go out and find [eternal forensic accountants] and instruct them,” said FRC Interim Executive Counsel Claudia Mortimore. She also told the publication that the FRC has become “more active and more efficient over the past few years.”
Last week, the FRC admitted that it was too slow to launch an investigation into KPMG, but remained adamant that it was correct to clear the company of any allegations of misconduct regarding its audit of HBOS.
The Financial Times, however, noted that the FCA’s size is significantly smaller than that of the Financial Conduct Authority’s, which has reportedly added nearly 100 employees to its staff in the last five years. Today, the FCA employs nearly 500.
The HBOS collapse has led to other scandals in the U.K.’s financial services space too. The FCA is probing Lloyds and its handling of allegations that HBOS mistreated some of its small business customers before Lloyds acquired it in 2009.