The accountancy regulator announced that, from now on, the FRC will set out its expectations of the experience, skills and attributes of candidates for key roles at “the Big Six”, including independent non-executives, heads of audit and ethics.
The FRC has recommended that it should assess and feedback to senior management how well it believes their appointees meet the criteria.
However, the FRC said, “We do not have specific powers in this regard and will look for the firms’ cooperation in doing so.”
The recommendation is part of the FRC’s plan to implement a new approach to the monitoring and supervision of the largest audit firms in five areas: leadership and governance; values and behaviours; business models and financial soundness; risk management and control; and evidence on audit quality.
PwC and EY said they would be considering the FRC's proposals and responding to the consultation to express their views and any concerns. KPMG, Deloitte, BDO and Grant Thornton declined to comment.
The move was revealed as part of the FRC’s strategy for the next three years. In its strategy and budget document, the FRC said it had actually spent less than it had budgeted for in 2017/18, as its staff costs were lower because recruitment to some roles has taken longer than anticipated.
The regulator said that, looking ahead into the second and third years of the 2018/21 strategy period, it is possible that it will need “additional resources in response to new expectations from government and others” for the monitoring of corporate governance and in response to Brexit.
The FRC explained that the next two years' budget reflects the 3% increase in its core operating costs, no further increase in general reserves and the cost of implementing the new audit firm monitoring and supervision rules which will be recovered from the audit professional bodies.
Sir Win Bischoff, FRC chairman said, “Through a period of uncertainty and change we will tackle those areas where we think improvements are necessary to reflect the strong public interest in transparency and integrity in business.
“The FRC will continue to engage with, and consult, stakeholders and will not hesitate to challenge where necessary. Good continued control over efficiencies and our level of reserves allows us to budget for no increases in our levies.”
It has increased its budget due additional work as a competent authority for audit and its new audit monitoring powers.
The FRC said that its funding requirements would increase by 1% in 2018/19. Excluding enforcement case costs, the FRC’s budget will increase by 3%.
The budget for 2017/18 will be £36m, £0.2m less than previously forecasted. The budget for 2018/19 is £36.3m.
Regarding Brexit, the FRC said it was working with the Department for Business, Energy and Industrial Strategy, other regulators and stakeholders in a bid to respond to the implications of leaving the EU.
The strategy and budget document is now up for consultation until the end of February, with the finalised document published in April.
The Stewardship Code will also be reviewed late next year. The FRC said it will do more to reach out to a broader range of stakeholders on actuarial issues.