(Bloomberg) -- The UK’s corporate governance and accounting watchdog is to be handed extra powers in a long-awaited shake-up of the audit industry.
The Financial Reporting Council, which has a range of powers including the ability to levy fines on auditors, is to be replaced with the Audit, Reporting and Governance Authority according to a draft bill announced Wednesday.
ARGA will now give the regulator power to investigate and impose sanctions on company directors found guilty of wrongdoing.
Under the previous Conservative government, ministers had delayed an overhaul of the audit regulator, which was excluded from last year’s King’s Speech.
In recent years, the FRC has taken a tougher approach to corporate failures, levying record fines on accounting firms after collapses such as retailer BHS and cake chain Patisserie Valerie.
Last October, the FRC fined KPMG about £21 million ($27 million) and imposed financial sanctions on the partners responsible for the audit of Carillion, a London-listed construction and facilities management company that imploded in 2018.
Still, watchdog CEO Richard Moriarty has frequently complained about gaps in the FRC’s regulatory powers, which allow it to intervene only when a company director is also a chartered accountant.
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Moriarty welcomed the King’s Speech on Wednesday, which set out the new Labour government’s legislative agenda. “Without these changes we are the regulatory equivalent of being a sheriff for only half the county and with weaker powers than are needed,” he said.
The regulator will also be able to cover larger private groups, instead of mostly listed companies, banks and insurers.
In his 2018 review, Legal & General Group Plc chairman John Kingman described the watchdog as a “ramshackle house,” and said it should be replaced by a more powerful regulator.
--With assistance from Isabella Ward.
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