Increased audit responsibilities prompt FRC levy hike
FRC goes cap in hand to the profession as it grapples with increased costs associated with its audit work
THE FRC is set to cap in hand to the profession and increase the amount sought through levy contributions as the accounting watchdog grapples with increased costs associated with its audit work.
In its Draft Plan, Budget and Levy Proposals for 2015/16, the FRC said overall expenditure will rise to £33.3m in 2015/16, from the £31.2m estimated spend in 2014/15. The most significant increase, £1.2m, will be in the cost of audit quality reviews, an increase of 12.5%, which results from Competition and Markets Authority (CMA) recommendations.
As a result of the 5.3% increase in its core operating costs for work on corporate governance, reporting and audit, the FRC said it will require an increase of 3.9% in the amount sought through the levy on preparers of accounts for core operating costs and of 2.5% in the contribution from the accountancy professional bodies towards these costs.
For 2015/16 the FRC said its funding requirement will rise to £11.9m from £11.4m forecast for 2014/15.
Recommendations issued by the CMA (then the Competition Commission) in 2013 require the FRC to increase its audit quality review activities, including the frequency of inspection and reporting on major audit firms and inspection of FTSE 350 audit engagements.
“We will require further additional resources in 2015/16 to meet the CMA recommendations and to implement the EU Audit Directive and Regulation. This will increase the number of firms inspected annually by the FRC as the inspection of any firms with public interest audits, as defined by the EU, will no longer be able to be delegated to the relevant Recognised Supervisory Bodies (RSBs),” the draft plan said.
Over the coming year, the FRC said it will focus on investor stewardship, corporate reporting, audit and its conduct activities.
“We will continue to enhance the effectiveness, efficiency and coherence of our monitoring and disciplinary roles. Our aim overall is to avoid large numbers of new initiatives so we can concentrate on ensuring the recent reforms are effectively established and deliver the outcomes sought,” said CEO Stephen Haddrill.