CIPFA: Now is the time to replace accountants’ regulatory body

20 Dec 18

The time is right for the government to replace the body that regulates accountants to improve public trust and help fight corruption, CIPFA has said.  

The independent Kingman review released on Tuesday said the Financial Reporting Council was built on “weak foundations” should be replaced “as soon as possible”.

Rob Whiteman, chief executive of CIPFA, agreed with the review’s findings and said: “Having robust audit practices and disciplines is incredibly important for government, both for providing a barrier against corruption, and for upholding the public’s trust in the integrity of our public sector organisations.”

The FRC also regulates auditors and actuaries in the UK.

Ian Peters, chief executive of the Chartered Institute of Internal Auditors, agreed, saying: “We believe radical change is now urgently required.

“Following the collapse of Carillion earlier this year the government was right to establish the independent review, but it is now vital that ministers act swiftly to implement its recommendations.”

In response to the review, business secretary Greg Clark has promised: “The government will take forward the recommendations set out in the review to replace the FRC with a new independent statutory regulator with stronger powers.”

The review, led by John Kingman, said in local authority audit “the FRC’s powers are limited or even non-existent, leaving it in the unfortunate situation of having been given responsibility without power”.

Kingman concluded that since the Audit Commission was abolished in 2015 local bodies can appoint auditors from an open and competitive market of providers and this has lead to prioritisation of cost over quality of audit.  

“These arrangements, if allowed to persist, run a very clear risk of allowing weak and limited audit disciplines to prevail in local government. This is particularly concerning given the vital role played historically by district auditors for instance, in detecting and seeking out corruption,” the review said.  

The review recommended that a new independent regulator named the Audit, Reporting and Governance Authority should be set and up and be given clear statutory objectives. Kingman said it should be accountable to parliament with the chief executive and chair appearing annually before a select committee

Whiteman said: “It is important that there is strong scrutiny of local authorities finances and financial management, particularly at a time when acute financial pressure has led some councils to take on bolder and more risky investment strategies.

“The time is now right to reconsider the public audit model and CIPFA looks forward to contributing to playing its part in the process.”

Kingman was asked by Clark in April to lead a “root and branch” review of the FRC as part of the government’s Industrial Strategy.

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