The FRC has published details of its draft plan and budget for 2015/16, outlining plans to increase its levies on preparers and professional bodies to meet the projected increase in  spending on audit quality reviews.

The annual budget will increase by 6.7% to £33.3m in 2015/16, compared to the £31.2m estimated spend in 2014/15.

The regulator says the most significant increase in expenditure, £1.2m, is to cover the increasing cost of audit quality reviews, an increase of 12.5%. The higher spend results from Competition and Markets Authority (CMA) recommendations concerning listed company audits, which follows an in-depth review of competition in the audit market in the UK.

There will be a 3.9% increase in the levy on preparers of accounts for core operating costs and a 2.5% rise in the contribution from accountancy professional bodies such as ICAEW, to fund these costs.  

The FRC expects to review around 250 corporate reports and 140 individual audits over the next 12-month period.

It has identified a number of priority sectors for corporate reporting and audit quality reviews, including insurance, food and drink, FMCG, manufacturers and retailers, companies servicing the extractive industries and business services.

The reviews will focus particularly on revenue recognition, the reporting of complex supplier arrangements, business combinations and the implementation of new accounting standards.

The next 12 months will also see FRC developing a three-year strategy for 2016/19, and it will consult with stakeholders on areas and topics for inclusion, as well as development of its regulatory approach.

Following three years of intense activity and major changes to accounting regulations including the introduction of the new UK GAAP - FRS 102 - effective 1 January 2015, and the establishment of the comply or explain rules on audit for listed entities, the FRC is predicting a year of consolidation rather than launching a flurry of new programmes.

Stephen Haddrill, FRC chief executive said: ‘In July 2015 it will be three years since the FRC’s reforms of 2012. We will take stock of how effective those reforms have been.

‘We will continue to enhance the effectiveness, efficiency and coherence of our monitoring and disciplinary roles.

‘Our aim is to avoid large numbers of new initiatives so we can concentrate on ensuring the recent reforms are effectively established and deliver the outcomes sought.’

2015/16 also marks the culmination of the current three-year strategic programme and the FRC will focus on four core areas. These include:

• Investor stewardship - support better quality engagement between boards and shareholders and ensure that signatories to the Stewardship Code deliver on the commitments they have given.
• Corporate reporting - promote reports that are clear and concise, as well as being fair, balanced and understandable; 
• Audit - support the Department for Business, Innovation and Skills (BIS) in implementing the amended EU Audit Directive; and
• Disciplinary activities - improve the pace and effectiveness of the independent disciplinary arrangements for public interest cases involving accountants and actuaries.

The FRC will undertake outreach activities to gather views on its plan and budget including a public meeting in February 2015.

The consultation will close on 16 February 2015 and comments should be sent to [email protected]

The Draft Plan, Budget and Levy Proposals 2015/16 are here: https://www.frc.org.uk/Our-Work/Publications/FRC-Board/Draft-Plan-and-Budget-2015-16.pdf