According to its annual report, the regulator budgeted for £33.5m of expenditure, but enforcement case costs were £2.8m lower than originally estimated. It is also taking longer than anticipated to recruit the additional staff required to fulfil the FRC’s new role as competent authority for audit in the UK. Currently, 15% of staff at the FRC work in the enforcement division.

The report states: ‘This year the FRC has concluded a number of substantial audit enforcement cases, and improved the speed of enforcement action. However there are gaps in our enforcement powers, particularly in relation to our ability to take action against directors who are not accountants.’

During the 2016/17 year the FRC received £32m in funding, of which some £11m came from listed preparers and around £3m from other preparers.

As at 31 March 2017, the regulator had 171 employees, up from 161 the year before, and recruited for 39 positions to cover natural turnover and the additional competent authority requirements. Staff turnover currently stands at 10.5%.

Of the FRC staff, 40% are male and 60% female, half the executive committee is female and over half of senior managers. However, the regulator admits it is failing to perform adequately in relation to ethnic diversity, especially at senior levels, and says it plans to address this.

The FRC performed 139 audit quality reviews (AQRs) over the year, and says that overall firms are making progress towards improving quality, although this is not consistent. The regulator says that going forward, it intends to consider wider issues that may be impacting on audit quality and ways in which it can help firms address these.

For the future, the FRC has announced a review of the UK corporate governance code. It says that during the next strategic period, it will also review its mission to ensure its work adequately reflects the expectations of all stakeholders. Key areas of activity will include the promotion of audit quality, clear and concise reporting, and the implementation of the new framework for technical actuarial standards.

Sir Win Bischoff, chairman FRC, said: ‘Public confidence in business depends not just on regulations and codes but on companies being held to account if they transgress.  This year the FRC has concluded a number of substantial audit enforcement cases, and improved the speed of enforcement action. 

‘However, there are gaps in our enforcement powers, particularly in relation to our ability to take action against directors who are not accountants.  We have engaged with the government, and stand ready to enhance our role if greater powers are conferred to rectify this.’

The FRC annual report and accounts 2016/17 is here.