The Financial Reporting Council (FRC) is to increase its levies on the majority of account preparers and the professional bodies by 2.2% in the next financial year, and says it will be looking for 'significant increases' in contributions to fund work on disciplinary cases and an expanded audit quality review programme.
In the Draft Plan, Budget and Levy Proposals for 2014/2015, the FRC says it also plans an increase of 4.8% in the rates applied to companies with a market capitalisation of more than £1bn.
The regulator says it faces a doubling of its workload as a result of the Competition Commission's requirement for it to carry out more audit inspections; changes resulting from the proposed EU audit directive; and a new requirement to review local government audits. It also highlights the growing cost of pursuing disciplinary investigations and says that while the reform in 2012 allowed unlimited fines to be levied in disciplinary cases, none of these monies are presently retained by the FRC and do not currently contribute to its funding.
FRC chief executive Stephen Haddrill said: 'The UK benefits greatly from the effectiveness and international credibility of its regulatory framework for corporate governance and reporting. Ensuring this framework serves the needs of investors without imposing disproportionate requirements and costs is vital.'
The 2014/2015 plan forms part of the FRC's three year strategy, and will focus on a number of specific areas. As well as the additional monitoring and enforcement work required under the new EU and Competition Commission proposals, there will be a thematic review of the progress made by the major firms in improving the auditing of banks and building societies, following concerns about the pace of audit quality improvements in this sector.
The FRC will also be updating the UK Corporate Governance Code in relation to risk management and going concern and encouraging improvements in the quality of explanations where boards choose not to comply with a Code provision. The regulator has pledged to promote the importance of greater consistency in the quality of auditing, and delivering more value to investors through auditor reporting. It will continue work to influence EU and international developments, as well as looking to support smaller listed and AIM companies in enhancing the quality of their reporting and auditing.
The FRC is planning a number of outreach activities to gather views on its plan and budget including a public meeting on 29 January 2014. The consultation will close on 28 February 2014.The draft plan is available HERE
