On 18 December 2018, the Department for Business, Energy and Industrial Strategy ("BEIS") published the final report of the Kingman review. The review considers how to strengthen the position and reputation of the Financial Reporting Council (FRC) and ensure that its structures, culture and capacity are fit for the future.
The review proposed a number of recommendations, including:
- The swift replacement of the FRC with a new independent regulator, the Audit, Reporting and Governance Authority (ARGA), which would be directly accountable to Parliament and whose overarching duty is to 'consumers of financial information,' not producers.
- Developing ARGA's capabilities to enable it to identify and mitigate emerging risks.
- An end to the current self-regulatory model for the largest audit firms.
- A Government review of the U.K.'s definition of a 'public interest entity' (PIE), which only covers entities with transferable securities admitted to trading in the European Economic Area (EEA). At present, only PIEs are bound by caps on the provision of non-audit work by audit firms.
- ARGA should not be funded on a voluntary basis and BEIS should put in place a statutory levy.
- BEIS should closely monitor the speed and effectiveness of ARGA's performance and ARGA should report annually to Parliament on its enforcement performance.
- In relation to the Stewardship Code, a renewed focus on 'excellence in stewardship' with greater emphasis on outcomes and effectiveness, not policy statements. The review further suggested that serious consideration should be given to abolishing the Stewardship Code if it remains a 'driver of boilerplate reporting.'
The Kingman review can be accessed here.
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