The Financial Times ran an interesting article on Friday (13/4/2018) headlined “FRC criticised over transparency”. It reported that the Financial Reporting Council answered only 6 out of 52 Freedom of Information requests since 2013. Atul Shah, Professor of Accounting at the University of Suffolk, was reported as saying: “This shows that there is a real problem within the soul of the FRC. It is a public regulator and not a private members’ club, and it has clear duties of transparency, accountability and reliability which it has been avoiding over many years”. He went on to say they have been fobbing off public queries over a long period and that it was really shocking.
How can they reject so many requests? Because only certain parts of their operations are covered by the Freedom of Information Act and they can claim they cannot comment on on-going investigations.
The Local Authority Pension Funds Forum (LAPFF) sent a long submission to the public consultation on the Corporate Governance Code echoing many of those complaints and adding others and saying that the FRC suffers from “internal cultural problems”. They are clearly very unhappy with the activities of the FRC. The FRC has seen fit to respond with a 5-page rebuttal letter which they have published on their web site.
I have of course covered this issue of the culture and processes of the FRC in two previous blog posts which are here: https://www.sharesoc.org/blog/regulations-and-law/brexit-hbos-globo-frc/ and here: https://www.sharesoc.org/blog/company-news/standard-life-uk-smaller-companies-frc-meetings/
My view is that although the FRC is under-resourced, the approach that it takes should be reformed. Too many times major accounting and audit issues take years to investigate, and often simply result in no action. For smaller companies, complaints can disappear into a black hole with no response being received at all to complaints. Reform is required.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
Excellent piece Roger which I thoroughly endorse. The FRC are not fit for purpose as a Regulator of Audit firms and is is high time changes were made. .