Business secretary Greg Clark said today, Monday, that a new, more powerful regulator is to replace the current Financial Reporting Council in a move that will "transform the audit and accounting sector".

The new Audit, Reporting and Governance Authority was recommended by the Sir John Kingsman's Independent Review submitted in December 2018. Among the shortcomings identified in the review were a lack of transparency and issues with enforcement activity.

The new regulator will for the first time be a statutory body with powers such as those to make direct changes to accounts rather than apply to court to do so, and more comprehensive, visible reviews for greater transparency. It will have "strategic direction and duties to protect the interests of customers and the public by setting high standards of statutory audit, corporate reporting and corporate governance, and by holding companies and professional advisors to account".

The new regulator will oversee the biggest audit firms directly (rather than those being delegated) and will have a new, "diverse board and strong leadership to change the culture and rebuild respect of those it regulates". There will also be greater sanctions available in cases of corporate failure, including new powers to require rapid explanations from companies and in the most serious cases publish a report about the company’s conduct and management.

Secretary of State for Business, Energy and Industrial Strategy, Greg Clark said: "This new body will build on our status as a great place to do business and will form an important part of strengthened public trust in businesses and the regulations that govern them."

The initial consultation on recommendations will run for 12 weeks to 11th June.

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