In a letter sent to the Treasury Committee chair Nicky Morgan, the FRC said that, in order to protect the public interest, accountants in public interest roles should be subject to a similar threshold of accountability as auditors.
FRC chief executive Stephen Haddrill, wrote, “We would appreciate your support for this and, if necessary, legislation.”
The letter follows the publication of a FRC report on its own investigation and supervisory inquiry into KPMG’s 2007 and 2008 audits of HBoS.
Haddrill admitted that the FRC should have adopted a “more proactive approach” to its early enquiries in relation to HBoS rather than a “heavy reliance” on other regulators.
He added, “We were concerned that the limitations in our powers to secure information from companies meant it was sensible to await the conclusions of the financial services regulators which had full access to information and whose conclusions would enable us to focus our own work better.
“However, these other investigations took much longer than initially expected and, therefore, a substantial gap in inquiries in relation to audit opened up whilst the FSA and FCA/PRA work was underway.”
In its report, the FRC said the FSA was the lead regulator in relation to the banks but it was not right to regard them as the lead regulator in relation to audit.
Haddrill recognised FRC investigations should be undertaken in parallel so that there is no unnecessary delay in reaching conclusions, and so its evidence can be fed into other inquiries if appropriate.
The FRC has since increased its powers to obtain information and increased its enforcement team.
The accountancy watchdog concluded in September that there was not a realistic prospect that a tribunal would make an adverse finding against KPMG regarding the audit of HBoS in the lead-up to the financial crisis.
The probe focused on why HBoS was granted “going concern” status in 2007, a year before it had to be bailed out following the financial crash.
Hadrill said the regulator now recognises that it should say more about the reasons for decisions to close an investigation.
“In the future, where there is a public interest to do so and no legal constraints, we will publish a summary of our reasons” he announced.
Last month, Alistair Osborne wrote in The Times that while Haddrill acknowledged the financial crisis had cost the UK £1.1trn in financial support for UK banks, he had failed to mention that “the FRC had cleared all the accountancy firms of any dodgy audits, most recently KPMG over HBOS”.
The FRC also said it was conducting a new review into its own governance and will in consequence be expanding the diversity, range of skills and experience on its board and committees.
The Treasury Committee chair reacted to the letter by saying, “This long-awaited report rightly acknowledges that the FRC should have been more ‘proactive’ in investigating KMPG’s audit of HBoS. It was only through pressure from the Treasury Committee that the FRC decided to act."
Morgan added, “As Mr Haddrill says, the report sets out the lessons that the FRC has ‘learnt for the future’. We will be calling the FRC to give evidence in the New Year to discuss whether their conclusions go far enough.”