It is easy to criticise the UK’s Financial Reporting Council and the audit firms it monitors. But critics and Sir John Kingman might just pause and consider the context.
Firstly – the FRC has no power to act against people who are not accountants.
Secondly – look at the whole regulatory map. Roles are tangled and overlapping. For example FRC ‘polices’ the Stewardship Code whose signatories include fund managers and pension funds. Yet the primary regulator of fund managers is a different body, the Financial Conduct Authority. Its terms of reference don’t mention stewardship.
Thirdly – consider what the audit experts describe as ‘the expectation gap’. Auditors are expected by the public to pass some general judgment on the character of the companies they audit. This function, unlike their technical ones, is beyond their authority and competence and, anyway, what value is such a judgement if your remuneration comes from those you are judging?
So for the Kingman Review of FRC to be effective it needs to address the whole map of regulation.