Although the measures adopted by the FRC are strong, in comparison to penalties imposed by Britain’s Financial Conduct Authority they are still small.
On Monday, in a significant development, the Financial Reporting Council (FRC) disclosed that it has accepted the findings of a study by former judge Christopher Clarke, which recommended significantly bigger penalties and fines for serious misdeeds by the world’s biggest accounting firms.
The adoption of the recommendation is likely to see the world’s Big Four accounting firms face potential fines of $14 million (10 million pounds) or more, for serious breaches of their duties, from June 2018.
The recommendation essentially doubles the penalty amount.
The adoption of tougher measures comes midst a push by the FRC to bolster its credibility following heavy criticism by lawmakers for being too slow to take on the big accountants who were caught up in company scandals.
New FRC’s disciplinary procedure sets out a case against an individual auditor or accountant at an independent tribunal before asking the tribunal to set a fine at a specific level.
Incidentally, the record amount agreed by a tribunal so far is 5.1 million pounds for PwC over its audit of RSM Tenon.
Clarke has recommended an increase in fines of uptp 10 million pounds or more for seriously poor audit work done by the Big Four accounting firm, which includes Deloitte, PwC, EY and KPMG; the four check the books of accounts of most international blue chip companies.
Further, the FRC also accepted other recommendations, including non-financial penalties, to exclude dishonest auditors from the accounting profession for at least a decade.
However, the level of fines will reduce depending on the level of cooperation the individual provides during an investigation to encourage early settlement, said the FRC.