LONDON Government is speeding up plans to streamline its cumbersome auditing and corporate governance watchdog, giving it a bigger stick to rein in rulebreakers and help shape European Union laws.
The shake-up at the Financial Reporting Council (FRC) comes at a time when the audit market is on the back foot over its role in the financial crisis.
The FRC is a sprawling umbrella group covering a range of supervisory activities from punishing auditors for rule breaches and checking up on accountants and actuaries to promoting best practice in how companies run themselves.
Its wide remit has often made it hard for the public to understand what it does.
"By tightening its focus and streamlining its governance and structure, we believe the FRC can be even more effective," UK business minister Norman Lamb said in a statement on Tuesday.
Laws come into force on July 2 to give the FRC's board more powers, in particular to order bigger fines for poor quality audits.
It was slammed for levying a 1.4 million pound ($2.2 million) fine on auditor PricewaterhouseCoopers (PWC) earlier this year. Although it was a record penalty from the watchdog, the sum is tiny compared with the auditor's turnover.
The FRC said it will begin a public consultation shortly on levying bigger fines.
The accounting and auditing industry has given mixed reviews to the reforms at the FRC.
"We recognise the need to streamline the operations of the FRC and believe that these reforms will make the body a more effective regulator," PwC, one of the world's "Big Four" auditing firms, said.
The ICAEW accounting body in Britain said the challenge will be to show that the revamped FRC can still champion high standards in an increasingly international arena.
"This will be especially important at a time when there are substantive reforms being considered in Brussels and other markets around the world," the ICAEW said in a statement.
The revamped watchdog would be able to conclude disciplinary hearings against audit firms without a public hearing as it seeks to speed up cases, some of which have gone on for years.
The FRC will regroup around two core activities: a codes committee, to be chaired by Jim Sutcliffe, and a conduct committee headed by Richard Fleck.
Both cover all the FRC's existing work areas with, for example, the conduct committee responsible for enforcement of corporate governance codes, accounting standards, auditing practices and actuarial standards.
"The reforms will simplify the FRC's over-complicated structure and enable it to mobilise all the expertise in its operating bodies to strengthen the UK voice in international debates on corporate governance and reporting," FRC Chairwoman Baroness Hogg said.
(Editing by David Cowell)