As of June 1, the United Kingdom’s Financial Reporting Council (FRC) will be applying an updated sanctions policy for audit firms based on the recommendations from an independent review. That panel had drawn on the Public Company Accounting Oversight Board’s experience in imposing combined financial and non-financial penalties. Included in the adopted recommendations are:

  • An increase in fines to £10 million or more for poor audit work;
  • Exclusion from the accounting profession for a minimum of ten years for dishonesty;
  • Greater use of non-financial penalties;
  • Sanctions that reflect the level of cooperation by respondents.

    The FRC’s guidance is for the Enforcement Committee, Tribunals and Appeals Tribunal that hear its enforcement cases involving auditors, accountants and actuaries. The policy states that the primary purpose of imposing sanctions for breaches of auditor regulations “is not to punish, but to protect the public and the wider public interest.” In cases where it is determined that a financial penalty is appropriate, the aim is to impose a financial penalty that:

  • is proportionate to the breach of the statutory auditor regulations and all the circumstances of the case;
  • will act as an effective deterrent to future breaches;
  • will promote public confidence in the regulation of statutory audit and in the way in which breaches are addressed.

    The new updated guidelines include the removal of any requirement that the Tribunals consider themselves bound by precedent in deciding what are the appropriate sanctions to impose.

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