UK’s top accounting watchdog wants more powers from parliament following KPMG-HBOS probe
The top accounting watchdog in the UK has called for accountants to be held to higher standards when auditing companies, after a probe into KMPG’s audits of HBOS in the run-up to the lender’s collapse failed to find the accountant guilty of misconduct.
Read more: KPMG has been cleared of wrongdoing over its 2007 HBOS audit
Stephen Haddrill, chief executive of the Financial Reporting Council (FRC), has claimed that the current standard which a tribunal must apply to find whether accountants should be penalised is too high a hurdle.
In a letter to the chair of the Treasury Select Committee, Nicky Morgan, Haddrill called on parliament to support changes proposed by the FRC and – if necessary – legislate to make them binding.
“A tribunal would need to find that no reasonable auditor or audit firm would have acted in the way that KPMG did, and this was not the case in relation to HBOS,” wrote Haddrill.
He added that the FRC had modified this test in relation to straight audit cases, so the watchdog could chase “breaches which may not have amounted to misconduct but which nonetheless should be pursued”.
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But the new and easier-to-prove test does not apply to accountants who are members of the professional accountancy bodies, since the bodies must agree to any changes.
“It is our view that accountants in public interest roles should be subject to a similar threshold of accountability as auditors now are, to protect the public interest,” Haddrill said.
The FRC did say it had modified some of its own processes since the HBOS case, such as undertaking investigations in parallel with other regulators rather than waiting for them to finish.
It also said it would be reviewing its own governance, as it noted concerns have been raised that it employs too many people from the major accounting firms it regulates.
The FRC said it would be “expanding the diversity, range of skills and experience” on its board and committees.
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