The Financial Reporting Council (FRC) has reported a decrease in outstanding misconduct cases against audit firms, dropping from 52 in autumn 2021 to 35 in March 2024. However, only 53% of enforcement cases were concluded within the two-year target.
The FRC spent £4.7 million on enforcement cases in 2023/24, down from £5.1m the previous year, within a total budget of £66.3m. Staff costs increased to £48.1m for 464 employees.
Despite cost-cutting measures, including £900,000 saved on legal fees and £700,000 on IT, the FRC reported a £1.18m loss. Total reserves were £14.8m, down from £16m. The UK Endorsement Board's running costs were £5.1m.
Revenue from accountancy bodies and audit firms rose by 20% to £30m, but total levy revenue was £1.5m below budget, partly due to fewer new listings on the London Stock Exchange and late payments totaling £1.2m.
The FRC cautioned that the reduction in open investigations does not necessarily indicate improved audit quality, especially for smaller firms or new entrants to the public interest entity audit market.
The regulator is awaiting new powers for enforcement and oversight and aims to become a 'modern, best-in-class regulator'. This includes developing an audit market monitoring function and reviewing corporate governance standards.
The FRC's new Birmingham office has opened, with recruitment ongoing. The organisation maintains a hybrid working policy, requiring at least 40% office attendance.
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