FRC publishes draft Plan and Budget 2019/20

The Financial Reporting Council (FRC) has published its draft Plan and Budget 2019/20, which sets out its priorities for the year and the resources it will need. The consultation will close on 8 May.

The FRC said it has welcomed the government consultation on Sir John Kingman’s Independent Review, which proposes changes to the FRC’s governance and powers as it transitions to a new statutory regulator, the Audit Reporting and Governance Authority (ARGA).

“In 2019/20, as we begin the transition to the new authority, ARGA, we will use our powers to promote the public interest in transparency and integrity in business. We are pursuing a step change in audit quality – revising audit and ethical standards, expanding our audit quality review regime, extending our audit firm monitoring and supervisory approach, and pursuing a heavier enforcement caseload," said Stephen Haddrill, chief executive officer at the FRC.

"The audit market still faces much public scrutiny," he added. "We will work with the Competition and Markets Authority on its proposals for reform and with Sir Donald Brydon on his review of the role and purpose of audit. We are expanding our work to monitor the quality of corporate reports and leading debate on the future of corporate reporting. And we will be seeking substantially to enhance investor stewardship through a new Stewardship Code.”

In 2019/20, the FRC said it will:

• Support the transition to the new Audit, Reporting and Governance Authority.
• Drive a step change in audit quality in the UK, using its powers to set auditing and ethical standards and monitor and enforce audit quality.
• Promote the quality and usefulness of corporate reporting through its programme of corporate reporting reviews, covering the whole annual report – and using its expanded enforcement resources to pursue an increasing caseload. 
• Promote corporate governance and investor stewardship that contribute to trust in business, including through the proposed new Stewardship Code.
• With government, implement an effective regulatory framework following EU exit.

The FRC has set an initial budget of £38.1m. This is an increase of 11 per cent compared with its expected 2018/19 outturn (£34.4m). It said that the planned increase in 2019/20 will fund an expansion of its audit quality reviews, audit firm monitoring and supervisory approach and of its enforcement work.

The budget does not include certain costs the FRC said it cannot yet accurately forecast; the costs of implementing those recommendations of the Independent Review that are subject to the government consultation, and some of the additional costs related to EU exit.

The FRC therefore expects that in finalising its plan for 2019/20 it will require additional resources, estimated to in the range of £2.4 to £4.9m, beyond the £38.1m budget. This will depend on government decisions following their consultation and EU exit. 

This article was first published in March 2019.