FRC sets out principles for public interest test
November 14, 2022
The Financial Reporting Council (FRC) has today published a set of principles that it will use to assess whether the public interest is best served by carrying out regulatory, supervisory and enforcement work that is outside of its primary regulatory perimeter as it transitions to the Audit, Reporting and Governance Authority (ARGA).
In its response to the White paper on Restoring Trust in Audit and Corporate Governance, the Government (committed to) expanding the definition of a public interest entity (PIE) to also include companies with over 750 employees and a turnover of over £750m. Much of the scope of ARGA’s work is expected to be determined by this new definition, however, the Government also recognised there will be exceptional circumstances where ARGA should take regulatory action in areas of public interest that are not within this regulatory focus.
The principles the FRC has set out today form the basis of the public interest considerations ARGA will take into account when determining whether it would be appropriate to act.
The FRC has also committed to producing a yearly report explaining how its regulatory scope applies to each of its functions and highlighting where it has taken any decision to go beyond it.
CEO of the FRC, Sir Jon Thompson, said:
“Acting in the public interest to uphold high standards of audit, corporate reporting and corporate governance underpins everything we do at the FRC, and will continue to do so as we transition to ARGA.
“These principles will help to protect all of our stakeholders, including investors, employees and pension holders, and provide greater clarity on when ARGA will take decisive action in the public interest.”
[Financial Reporting Coucil, UK]