Tuesday, 18 December 2018

UK: Kingman review proposes new regulator to replace the Financial Reporting Council

The independent review of the Financial Reporting Council - aka the Kingman Review - published its final report today: see here (pdf). The principal recommendation is dramatic but not entirely unexpected: replace the FRC with a new regulator. This new regulator, provisionally called the Audit, Reporting and Governance Authority, is recommended to have the following strategic objective: "To protect the interests of users of financial information and the wider public interest by setting high standards of statutory audit, corporate reporting and corporate governance, and by holding to account the companies and professional advisers responsible for meeting those standards”.

There is, of course, much of interest in the Report. It finds, for example, that the FRC has been an effective custodian of the UK Corporate Governance Code, and the Code is still regarded as "world-leading". But a different view is taken of the UK Stewardship Code, the Report describing it as a "major and well-intentioned intervention" but one that "is not effective in practice".

Alongside the Report, a letter from Sir John Kingman to the Secretary of State for Business, Energy and Industrial Strategy has been published. This letter, available here (pdf), sets out Sir John's view on whether there is a case for fundamental change in who appoints company auditors.

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