The survey, conducted with recruitment specialist The Core Partnership, found 57% of respondents are opposed to increased powers of enforcement, currently under review. Just 27% came out in favour of more power for the FRC, with the remaining 16% unsure.

Of those in favour of retaining the status quo, reasons given ranged from not wanting to see ‘increased pressure on businesses’ to the belief that the FRC’s success stems from ‘collaborative and supportive’ voluntary arrangements with its stakeholders, rather than statutory backing or enforcement powers.

Critics saw the FRC as ‘toothless’ and ‘a technical body rather than an enforcer on publicly listed companies’, while others said the events surrounding Carillion suggested it had failed to leverage the powers it currently has. 

Amongst respondents’ recommendations, some thought the FRC should have more powers to advise rather than just supervise, and argued that its guidance should carry more weight and there should be power to fine or otherwise sanction firms and auditors whose actions result in significant damage to shareholder value.

Respondents also wanted the regulator’s powers to be extended to cover all directors where it finds fault, not just those who are accountants or actuaries.

While the majority of respondents (61%) believed that the FRC is sufficiently independent of those it regulates, with only 11% saying otherwise, one respondent commented that: ‘Better balance and oversight from those who do not have Big Four [accounting firm] connections would not hurt.’

Peter Swabey, policy and research director at ICSA, said: ‘It is clear from the responses that there are concerns over the whole area of effectiveness of accounting and auditing, with many respondents recognising that there are potentially serious issues around the majority of large companies being audited by one of four audit firms.

‘While some feel that audit firms should be limited to the number of large audits they can carry out, and that there should be more transparency about length of service in the annual report and AGM notices, others feel that the value of rotating firms is limited when there are few options in the market place that can cope with the size and geographical breadth of large and complex companies.’

Swabey also highlighted concerns that, while a risk-based approach to large audits has its benefits, this approach could lead to less time and focus on the subsidiaries, and missed opportunities to spot lower-level systemic process issues. Allocating more time and better experienced auditors might mean that a more meaningful audit could be achieved. 

The Department for Business, Energy and Industrial Strategy has asked Sir John Kingman to conduct a ‘root and branch’ review, due for completion by the end of 2018, to assess the FRC’s governance, impact and powers, to help ensure it is fit for the future.

Report by Pat Sweet