The U.K. government is readying to create a new accounting and auditing watchdog after months of scrutiny that the current regulatory landscape has failed to prevent accounting scandals and protect customers.
The Wall Street Journal reported this week that the current Financial Reporting Council (FRC) will be merged into a new regulatory entity, the Audit, Reporting and Governance Authority (ARGA). The FRC took heat for failing to predict or prevent high-profile scandals, including the collapse of government contractor Carillion and, more recently, the accounting irregularities and subsequent administration of Patisserie Valerie.
The FRC will remain active until the new body is established, reports said, while the government is currently in the process of appointing a chair and deputy chair. After the ARGA launch, FRC Chairman Sir Win Bischoff will resign, while his deputy, Gay Huey Evans, will retire toward the end of April, the WSJ said.
Business Secretary Greg Clark announced the formation of the new body after Legal & General Group Plc Chairman Sir John Kingman led an independent review of the nation's current audit and accounting industry. The Competition and Markets Authority also conducted its own review of the sector.
The sector is currently dominated by only a handful of large players, which have also received criticism for their lack of foresight to prevent several recent scandals.
"The government intends to move swiftly to implement these reforms and overhaul the sector," said Clark in a statement. The new regulator will be given the power to receive "rapid explanations" from organizations they review and to publish their findings in reports.
"The U.K. has always been a world leader in audit and accounting services, with world-class frameworks for corporate reporting, corporate governance and regulatory oversight," Clark said.
Last month reports in the Financial Times said Grant Thornton Chief Executive David Dunckley received criticism after remarks made at the House of Commons as he told MPs that auditors "are not looking for fraud." Dunckley was being questioned by policymakers over Grant Thornton's role as Patisserie Valerie auditor, which was forced into administration earlier this year following revelations of a $52 million fraud scheme.