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FRC publishes its draft Strategy, Plan and Budget for 2021/22

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23 Feb 2021

The Financial Reporting Council (FRC) has published its draft Strategy, Plan and Budget for 2021/22. Comments are requested by 12 March 2021.

The Strategy, Plan & Budget 2021/22 reflects FRC’s continuing commitment to serving the public interest while developing its transition to the Audit, Reporting and Governance Authority (ARGA) in anticipation of legislation to put ARGA on a statutory footing. The 2021/22 budgeted costs increase by £6.8m, almost half of which funds the organisation’s development and maturity; the other half funds the establishment of the UK Endorsement Board (UKEB) following the UK’s exit from the EU.

The FRC indicates that moving forward it will reorganise into four divisions consisting of:

  • Regulatory Standards;
  • Supervision;
  • Enforcement; and
  • Corporate services.

The draft plan and budget sets out the FRC’s strategic priorities in these four areas:

Regulatory Standards

  • Develop and maintain UK and Ireland accounting standards (GAAP) in a timely fashion.
  • Ensure the UK endorsement process for IFRS provides accountability and transparency by establishing due process oversight.
  • Issue a feedback statement and next steps following the FRC’s report on the Future of Corporate Reporting.
  • Develop and maintain UK auditing standards
  • Work to operationalise audit market competition policy proposals set  ahead of legislation.
  • Undertake assessments of performance against the UK Corporate Governance Code, the UK Stewardship Code and the Wates Corporate Governance Code for Large Private Companies.
  • Consult on revisions to the UK Corporate Governance Code and associated guidance ahead of legislation, subject to the outcome of Government consultation.
  • Deliver FRC Lab reports on stakeholder reporting and s172 of the Companies Act 2006, risk, uncertainties and scenarios, and performance metrics.
  • Deliver improvements to the FRC’s stakeholder engagement function, including through a refreshed communications strategy and increased use of digital platforms.
  • Support the FRC’s transformation into ARGA through establishing a programme of work aimed at reviewing and revising standards, codes and guidance, where appropriate, in advance of legislation.
  • Build technology and innovation outreach and embed digital into its core policy areas.

Supervision

  • Taking a risk-based approach, maintain the scope and number of Audit Quality Reviews and Corporate Reporting Reviews undertaken.
  • Use thematic and cross-market reviews to promote improvements in corporate reporting, audit quality and audit market resilience.
  • Build and deepen its forward-looking supervision of the major audit firms.
  • Further develop its oversight of the professional bodies, taking over the decision-making function of PIE audit firm and auditor registration as a tool for supervision of audit firms.
  • Further develop and share views on what constitutes high quality audit, including in response to changing circumstances, such as the impact of COVID-19..

Enforcement

  • Deliver robust, fair and transparent regulatory outcomes.
  • Deliver investigations and enforcement action in an increasingly timely manner,
  • Create long-term behavioural changes by working closely with the Supervision and Regulatory Standards divisions to deliver a holistic regulatory approach.
  • Promote improvements through communicating clear and impactful messages in our enforcement outcomes
  • Support the transformation of the organisation into ARGA by working collaboratively with internal and external stakeholders.
  • The independent reviews included new enforcement regime recommendations for directors, accountants and potentially actuaries.

Corporate services

  • Deliver the supporting pillars of a new robust and independent regulator.
  • Support organisational growth and increased capabilities to set a medium-term workplace strategy to encompass career development and progression. 
  • Review and set the medium-term IT and information management strategy and implement the recommendations to support organisational resilience and effective decision-making, drawing on the data and intelligence available.
  • Embed the new governance arrangements and support the new board and NEDs in discharging their responsibilities
  • Continue the range of expert support services – legal, finance and risk, HR, IT, and economics, research and data analytics, including to the UKEB.

The draft plan and budget also covers the operational structure, governance and resourcing of the FRC and the UK Endorsement Board. The FRC also sets out its proposed budget for 2021/22 for expenditure and funding. Expenditure is being increased in the areas of audit firm supervision, audit market supervision, corporate reporting review, actuarial standards and stakeholder engagement.

The press release and Draft Strategy and Plan & Budget 2021/22 are available from the FRC website.

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