HC 360
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HC 360
Annual Report and Financial Statements of the
F
inancial Reporting Council Limited
Presented to Parliament by the Secretary of State for Business, Energy
and Industrial Strategy by Command of Her Majesty
Ordered by the House of Commons to be printed on
22
July 2021
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The purpose of the FRC is to serve the public interest by
setting high standards of corporate governance, reporting
and audit and by holding to account those responsible for
delivering them.
In this report
Strategic Report
6
1 The FRC at a Glance 7
2 Statement by the Chair of FRC 9
3 Chief Executive’s Report 11
4 Strategic Priorities for 2021/22 20
5 Our People 21
6 Section 172 and Stakeholder Engagement 26
7 Environmental Impacts 29
8 Ethics and Compliance 32
9 Managing Complaints to the FRC 34
10 Financial Review 40
11 Risk Management 43
Governance
47
12 Governance and Transparency 48
13 Our Executive Committee 56
14 Our Board Members 59
15 Conduct Committee Report 76
16 Regulatory Standards & Codes Committee Report 79
17 Supervision Committee Report 81
18 Audit & Risk Committee Report 82
19 People Committee Report 88
20 Remuneration Framework 93
21 Directors’ Report 97
Financial Reports
102
22 Independent Auditor’s Report 103
23 Financial Statements 112
24 Notes to the Financial Statements 115
Appendices
127
Appendix 1 Abbreviations 128
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Strategic Report
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1. The FRC at a glance
The Financial Reporting Council (FRC) regulates auditors, accountants and actuaries and
acts in the public interest by setting high standards of corporate governance, reporting
and audit, and by holding to account those responsible for delivering them.
As we grow and change, our broad public interest purpose remains the same and we
will scale our capacity appropriately across the areas in our remit in order to achieve our
core objectives. We are committed:
The benet of our regulatory activities is shown in the virtuous circle below, which
demonstrates how we promote condence in the UK market.
Building trust brings better outcomes for all stakeholders
Improved outcomes created by each of our regulatory activities are shown in the blue
rectangles, each of which can positively reinforce others in the circle leading to overall
benets to all stakeholders including greater transparency, increased trust in UK markets
and lower cost of capital.
To set high standards in corporate governance and stewardship, corporate
reporting, auditing and actuarial work, and assess the eectiveness of
applying those standards, enforcing them proportionately where it is in
the public interest.
To promote improvements and innovation in the areas for which we are
responsible, exploring good practice with a wide range of stakeholders.
To inuence international standards and share best practice through
membership of a range of global and regional bodies and incorporate
those standards into the UK regulatory framework.
To promote a more resilient audit market.
To transform the organisation into a new robust and independent
regulator, acting in the public interest.
FRC
Strong
independent
regulator
underpinning
the system
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Better
outcomes
for all
stakeholders
Acting in
the public
interest
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Our business model
•
Lead the development of public and
technical policy, informed by inuential
investor and stakeholder engagement.
•
Set codes, standards and guidance that
support high quality corporate reporting,
corporate governance and stewardship,
audit and actuarial work.
•
Drive innovation in the public interest for
our stakeholders.
•
Inuence international standard-setting
and collaborate with other regulators.
•
Drive the application of high standards
in corporate reporting, auditing and
actuarial work through proportionate
and risk-focused enforcement action
where it is in the public interest.
•
Promote improvements and innovation
in these areas by communicating
clear and impactful messages through
enforcement cases and publications,
and through the setting and monitoring
of eective non-nancial sanctions.
•
Deliver our statutory responsibilities
for corporate reporting review and as
the competent authority in respect of
statutory auditors and the audit market.
•
Monitor the application of corporate
reporting and audit standards and
hold to account those that fail to meet
these standards.
•
Promote improvements and innovation
•
Promote a more resilient audit market.
•
Support the regulatory Divisions
by providing a robust and resilient
framework for the delivery of FRC’s
wider objectives.
•
Support the FRC’s transformation to
a modern, forward-looking regulator
as a trusted partner and adviser to the
business and through our partnership
Regulatory Standards
Enforcement
Supervision
Corporate Services
Our
Values
1.
2.
3.
4.
Our values
The FRC works to clear and shared corporate values that are kept under review.
The FRC corporate values and behaviours will be reviewed in 2021/22.
1. Eective
2. Fair
3. Independent
4. Inuential
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2. Statement by the Chair of FRC
The last year has certainly been an eventful one for the FRC. Along with the rest of
society and the corporate world we have had to adjust to new ways of working and the
rapidly changing economic environment that resulted from the Covid-19 pandemic. I
have been impressed by how FRC sta have all risen to this challenge, to serve the public
interest during this personally dicult time and engage with our stakeholders and other
regulators to deliver on the 2020/21 plan in a proportionate and agile way.
During these dicult times we have continued to press on with transformation of the
FRC and drive the reform that will ultimately deliver the creation of a new regulator:
the Audit, Reporting and Governance Authority (ARGA). The reform programme is
currently out for consultation after the publication of the White Paper
Restoring trust
in audit and corporate governance
, which brings together the recommendations, some
155 in total, from the three independent reviews commissioned by the Government.
The FRC has wholeheartedly accepted the need for reform, is a very active participant in
the consultation process and continues to reshape and reorganise itself in line with its
transformation programme.
We have also been working hard in these strangest of times to ensure that the FRC
continues to deliver on its purpose as it is even more important that investors and other
stakeholders have condence in the UK as a place to do business and invest, and in
the information companies are providing to the market. I am particularly proud of the
successes that the team have delivered, such as:
• Implementing the majority of recommendations in the transformation programme
possible without legislation, and making signicant progress towards the remainder.
•
Supporting sta over the last year and driving the modernisation of the FRC by
building better and resilient organisational foundations.
•
Continuing to demonstrate national and international thought leadership and
credibility through corporate governance, stewardship and FRC Lab outputs.
The Board is also undergoing its own transformation as it readies itself for the creation
of ARGA. It has been my privilege to be asked by the Secretary of State to lead this
transition as Interim Chair.
Olivia Dickson stepped down during the year as her term as a Director came to an end.
She made a huge contribution to the Board and to the Codes and Standards and Audit
Committee, and was a tireless advocate for modernising risk appetites and the actuarial
community. I would also like to thank Simon Dingemans, our former Chair, for his
contribution and in particular his recommendations regarding the streamlining of the
FRC’s governance that have now been implemented.
While we have continued to move forward, there have been challenges this year as
we have moved to transform our governance structure and ll key vacancies. The
appointment of Board members is the responsibility of the Government, and it is
disappointing that recruitment to the Board has taken longer than we may have liked;
however, I have been personally pleased to see continued good governance and
stewardship of the FRC by my colleagues on the Board and Committees and in the
Executive Team.
“... it is even
more important
that investors
and other
stakeholders
have condence
in the UK as
a place to do
business and
invest, and in
the information
companies are
providing to the
market.”
Keith Skeoch
Chair
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With that in mind, I would like not only to thank, but also to acknowledge the
commitment and hard work put in by my fellow Non-Executive Directors during these
dicult and uncertain times. Julia Unwin as Chair of the new Regulatory Standards and
Codes Committee, John Coomber as Chair of the Audit & Risk Committee and Jenny
Watson as Chair of the People Committee. They have all selessly taken on bigger roles
to ensure that the highest levels of governance are maintained at a time when the Board
as well as the broader organisation is undergoing a major transformation. Jenny and
Julia have also played a leading role in ensuring that the Board put public interest at the
heart of our strategy and purpose. I am also very grateful to David Childs, who agreed to
extend his term of oce to ensure that the transition associated with the establishment
of the Supervision Committee runs as smoothly as possible.
I very much look forward to welcoming Hannah Nixon and Ruwan Weerasekera as
new Directors. However, I remain concerned that the changes to high level governance
structures we started to implement during the period will be delayed further leaving
signicant gaps in our committee structure. Julia Unwin’s and Jenny Watson’s current
terms come to an end in August and have not been renewed and David Childs will step
down in October. I am now in my tenth year as a director having extended my term at
the request of the Secretary of State in April 2021. The second extension to my term
ends in October and in line with best practice outlined in the Corporate Governance
Code I will step down both as a director and Interim Chair. Steps are being taken to
appoint my successor and NEDs to the Board which we hope will conclude in the
Autumn. While I remain committed to supporting this refresh of the board as well as
continuing the implementation of the changes recommended by Kingman and Brydon,
there is a grave risk, given recent experience, that these appointments will not be
completed by the time myself and the other directors leave the Board. This will leave
gaps in the governance structure and may create delay in the important board reform
and transformation process underway until such time as the recruitment process is
completed.
Finally, I want to pay testament to Sir Jon Thompson, his Executive Team and our people,
whose unstinting eorts in the most dicult of circumstances have meant that neither
the process of transformation nor the day-to-day functioning of the FRC has faltered
this past year.
Keith Skeoch
Chair
1 July 2021
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3. Chief Executive’s Report
This report sets out our progress against our strategy and plan for 2020/21 and looks
forward into 2021/22 and beyond, as we continue our transition towards becoming the
new robust and independent regulator, ARGA, set out in the Government’s White Paper,
subject to legislation.
First, I would like to thank all FRC sta for their dedication, agility and hard work, during
what has been a challenging year we all have faced. As well as focusing on our duty of
care to sta, we have also acted quickly to respond to the external environment that
we – and our stakeholders – have found ourselves in.
The improved capacity, capability and processes that we delivered in 2020/21 have moved
us towards becoming the t-for-purpose regulator that Kingman envisaged and provides
a rm foundation on which to build further. We need to continue to build our resilience,
provide quality standards, supervision and support to stakeholders and the regulated
community, and to increase the pace of change to deliver on the package of reforms
that Government has put forward in its White Paper, which is live at time of writing.
I am particularly proud of the progress we have made in three key areas over the last year:
• Improving our delivery
• Transforming our organisational capacity and capability
• Listening to and engaging more with stakeholders
2020/2021 Highlights
162
246
150
49
179
326
asset managers applied
to be signatories to the
Stewardship Code
corporate reporting
reviews completed,
corporate reporting
review case summaries
published for the rst
time and 5 thematic
reviews published
audit quality reviews
completed
Operational separation
implemented across the
Big Four audit rms on a
negotiated basis
FRC Lab projects,
including the Climate
Change Thematic report
published in Oct 2020
Growing caseload for
enforcement – £16.4m
in nancial sanctions,
49 cases open as at
1 April 2021
recommendations from
the Professional Oversight
team to improve oversight
and standards of
members of professional
accountancy bodies
FRC has grown to 326
sta, with recruitment
continuing at pace during
lockdown to provide
capacity and capability for
transformation to ARGA
Sta survey has shown
signicant positive
increases in engagement
and sta sentiment
“I would like to
thank all FRC
sta for their
dedication,
agility and hard
work, during
what has been
a challenging
year we all have
faced.”
Sir Jonathan
Thompson
Chief Executive
Ocer and
Accounting
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Improving our delivery
Over the last year we continued to build on progress made in response to the three
independent review recommendations. At the core of the three independent reviews
(from Sir John Kingman, Sir Donald Brydon and the Competition and Markets Authority
(CMA)) was a clear call to broaden both our role and responsibilities and deepen our
supervisory regimes to provide greater assurance.
Although the legislative timetable to set up ARGA is yet to be conrmed, we
have established an integrated transformation programme to address the 155
recommendations of the three independent reviews. During 2021/22 the programme
will focus on implementing any remaining recommendations not requiring legislation,
many of which have already become embedded in our ‘business as usual’ activities.
In a few areas we have moved forward without legislative backing, for example in
operational separation, in anticipation of change and continued to drive forward the
recommendations. These changes have already delivered benets, for example in the
streamlining of our governance structures and increased monitoring, supervision and
enforcement capacity. We have invested in setting up FRC to become the new statutory
regulator. We reported to the Department for Business, Energy and Industrial Strategy
(BEIS) Select Committee in September on our work plan.
The programme will also continue to support BEIS in developing legislation and
implementing policy proposals as a result of the consultation process. To reect our
current business model and organisational change progress, we have embedded
progress on the Transformation Programme into the report as it’s embedded into the
organisation – not an add-on change programme but part of a changing organisation.
Transforming our organisational capacity and capability
During 2020/21, we supported the delivery of our objectives by increasing our
capabilities across all of our core activities, in line with our published strategy and plan.
The four pillars of the organisation are now in place and we will build on that framework
in the year ahead to grow organisational capacity and achieve our stated priorities.
This included creating a new stakeholder management and corporate aairs function,
strengthening our supervision of audit rms to promote better audit quality, undertaking
work to promote a more resilient audit market and setting up a Competition Policy Team
under a new Head of Competition.
We have implemented the majority of the recommendations from all the reviews that
are possible without legislation, and made signicant progress towards the remainder.
Finally, in order to accurately measure and report transparently on performance against
our objectives, we have agreed key performance indicators (KPIs) for each of our
strategic objectives. These will be reported both internally and externally during the
forthcoming year.
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Listening and engaging more with all stakeholders
I am pleased that the FRC is speaking with a more condent voice and focusing on
delivering real impact and change for stakeholders as we act in the public interest. We
have a dedicated Stakeholder Engagement and Corporate Aairs Team and the Board
has approved a new Strategy that addresses the recommendations to improve our
transparency, outreach and intelligence gathering. We have introduced:
• Standing panels for stakeholders, investors and audit chairs, a regular programme
of outreach, podcasts and webinars, tactical responses to consultations to provide
regular touchpoints and increased intelligence gathering, consultation and
promotion of guidance.
• Embraced new ways of engaging with stakeholders during lockdown, holding events
and improving/increasing how we amplify messages to our key audiences over social
media.
• Created a public aairs function to inform and educate relevant Parliamentary and
international stakeholders about our work and transformation programme.
• In the last year we have seen signicant increases in the number and range of people
attending our events, giving us rich feedback on our performance and our future.
“We have implemented the majority
of the recommendations from all
the reviews that are possible without
legislation, and made signicant
progress towards the remainder.”
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Key thematic programmes across the FRC
The last year has seen many issues needing an ‘all FRC’ response, not only for our people
to ensure they had the support they needed to protect their health and families, but
also to do their job and ensure continuity of service and support to all stakeholders and
coordination with Government and other regulators.
We have:
Responded to the
Covid-19 pandemic
by providing guidance
to audit rms and
companies on going
concern, a review of
Covid-19 reporting
and work on remote
examinations by
professional bodies.
Brought together
our leadership and
guidance on climate
change and the role
of corporate reporting
and governance –
the Climate Change
Thematic report
published in 2020
brought together our
work on climate change
to date and a cross-FRC
group continues to work
on the issue, as well
as working with other
regulators and BEIS in
the run-up to COP26.
Transformation
programme and strategy
– I am pleased with our
progress so far and, as
noted above, we have
delivered change that
doesn’t require change
in legislation. Risks
still remain around
legislation, but we will
continue to transform
the FRC and drive higher
standards.
We continue to
maintain a strong
relationship with BEIS
and to collaborate on
the future of audit and
corporate governance,
on the White Paper and
the UK’s exit from the
EU. (hereafter EU Exit).
On UK’s exit from the
EU, we worked across
the organisation and
jointly with BEIS to
plan for the end of the
transition period and
support continuity of
business. Following
EU Exit on policy and
third-country regimes,
we are also supporting
the set-up and stang
of the independent UK
Endorsement Board
(UKEB) for International
Financial Reporting
Standards (IFRS.).
We are now working
more closely with
other regulators
and Government
Departments (including
HM Treasury (Actuarial),
the Financial Conduct
Authority (FCA) and the
Prudential Regulation
Authority (PRA) as well
as BEIS in the response
to Covid-19, climate
change and with the
Ministry of Housing,
Communities and Local
Government in relation
to audit quality in local
government.
We continue to promote
our international and
UK credibility and
leadership through
high -quality outputs
and impact on wider
corporate governance
and stewardship
practice; for example,
gathering 162 applicants
to be signatories to
the Stewardship Code
this year, increasing the
number and quality of
consultations, ongoing
thought leadership from
the FRC Lab and driving
change on a voluntary
basis with rms, e.g.
operational separation.
1.
4.
2.
5.
3.
6.
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Divisional updates
The Regulatory Standards Division this year has delivered a number of signicant
revisions to our Codes, Standards and Guidance, carried out monitoring work,
commissioned research and engaged actively with our stakeholders to ensure that
our work is informed by both the user perspective and the public interest. The
uncertainty caused by the Covid-19 pandemic meant that we worked collaboratively
with Government and other regulatory authorities to issue additional urgent guidance
for auditors, companies and investors that supported the continued provision of high-
quality information to nancial markets.
Our stakeholders tell us that it is important that companies do the right thing – our
Corporate Governance and Stewardship Codes are critical in supporting that objective
and continue to attract signicant interest internationally. Our revised Stewardship Code
received strong interest from asset managers, service organisations and asset managers
wanting to become signatories when we opened the rst window for applications.
Standard setting is an international activity – the UK benets from high-quality global
standards for audit and corporate reporting. To ensure that they are developed in a
way that meets the needs of UK PLC, we engage with the international standard setting
boards for audit, ethics and nancial reporting, respectively: the International Auditing
and Assurance Standards Board (IAASB), International Ethics Standards Board for
Accountants IESBA) and International Accounting Standards Board (IASB). Sometimes,
it is not possible to achieve the outcomes we need to achieve in the UK through
international engagement alone, and we provide international leadership by making our
own changes to standards, as we have done with the Standard that sets out the auditor’s
responsibility for fraud (ISA (UK) 240).
We are also keen to demonstrate our own thought leadership, as we did through our
consultation on the Future of Corporate Reporting, which set out proposals for a new
reporting framework to better meet the needs of our stakeholders and to better support
decision-taking. To ensure that our technical actuarial standards remain t for purpose
and support the delivery of high-quality work, we are undertaking a post-implementation
review that will provide us with an evidence base for any revisions needed.
Our thought leadership is also demonstrated through the work of the FRC Lab. The
Lab provides an environment where investors and companies can come together to
develop pragmatic solutions to today’s reporting needs. In the last year it produced
ten publications, bringing insight and understanding to several key areas of disclosure.
The Climate Change Thematic report, published in autumn 2020, brought together our
thinking on this crucial issue, and continues to be an area of focus as we head towards
the COP26 conference in November 2021. We are working with other regulators
under the auspices of the Joint Forum for Actuarial Regulation (JFAR), to support
the development of the Government’s pensions dashboard by undertaking work on
Estimated Retirement Incomes, which has received strong support from the Minister
for Pensions and Financial Inclusion.
Technology and digital innovation have a massive impact on how companies report and
engage with their stakeholders, and how auditors use technology to improve the quality
of audit through greater insight, understanding and enhanced risk assessment. Digital
reporting has huge potential to deliver consistent and comparable information in a cost-
eective way, and we need to take account of this in our regulatory standards. We are,
1. Regulatory Standards
“Our
stakeholders
tell us that it is
important that
companies do
the right thing”
“
Digital
reporting has
huge potential
to deliver
consistent and
comparable
information in
a cost-eective
way, and we
need to take
account of this
in our regulatory
standards.
”
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therefore continuing to build internal expertise and link our work to the wider
Government strategies on data and digital.
A key focus this year has been working jointly with BEIS This is not only to support the
delivery of the White Paper, but also to adapt the UK’s regulatory framework following
EU Exit, including support for the newly established Endorsement Board. There is a
lot more to be done, and we value the strong and collaborative relationship with BEIS
and how our teams have worked together to deliver on the reform agenda. To allow
us to support Government in developing policy responses to the Competition and
Markets Authority’s recommendations on audit market reform, we have established a
Competition Policy Team to consider the detailed legislative and regulatory implications.
We have restructured and recruited to build capacity across the Division and deliver
reform along with business as usual. Our Stakeholder Engagement and Corporate Aairs
Team has supported greater engagement by the FRC with all stakeholders, leading to
a broader base of activities and a new strategy – the impact of this is already being
seen during the extensive outreach we have carried out in support of the Government’s
reform proposals for audit and corporate governance.
Over the past year, the Division has continued to work in the public interest to monitor
quality and promote improvements in corporate reporting and audit. Despite the
challenges of lockdown and home working, the teams carried out 150 audit inspections,
246 reviews of corporate reporting and our full programme of work to oversee the
professional bodies.
We have developed our approach to audit rm supervision, building on our audit quality
reviews to give rms forward-looking feedback on priorities to improve audit quality.
A key success of the year has been that the Big Four rms agreed to operational
separation of their audit practices from the rest of the rm, in line with the principles
published by the FRC in June 2020. The objectives of operational separation, which is
world-leading, are to ensure that audit practices focus above all on the delivery of high-
quality audits in the public interest, and do not rely on persistent cross-subsidy from the
rest of the rm. The FRC has agreed the rms’ implementation plans to be completed by
2024 at the latest, and they have already taken important steps, such as creation of
audit boards.
The Division prepared successfully for EU Exit from 1 January 2021, including establishing
the regime for third-country auditors, onshoring assessments of equivalence and
adequacy of other countries’ audit regulation and preparing to negotiate mutual
recognition agreements with overseas regulators.
In 2020/21 the division contributed towards the Lab’s Climate Change Thematic,
published six thematic review on audit quality indicators and completed four thematics
on corporate reporting, including an unscheduled review into the nancial reporting
eects of Covid-19. We also published a letter to audit rms on professional scepticism
and the importance of eective challenge of the management of audited entities, which
has been a key theme from our audit inspections. A key message from our work on
corporate reporting has been the need for disclosures to be sucient for users of the
accounts to understand the eect of signicant matters on the companies’ performance,
cash ows and nancial position, particularly when explaining the eects of the
Covid-19 pandemic.
2. Supervision
“Despite the
challenges of
lockdown and
home working,
the teams
carried out
150
audit inspections,
246
reviews
of corporate
reporting
and our full
programme of
work to oversee
the professional
bodies.”
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The objective of the Enforcement Division is to hold those we regulate to account where
needed by providing robust, fair and timely enforcement action. Our cases are typically
large and complex and our case portfolio is active. During the year we grew the Division
by 44% (from 36
1
to 52 at March 2021) to meet case needs and improve timeliness.
Further expansion will be necessary in 2021 to keep pace with the enforcement caseload.
We published our second
Annual Enforcement Review
which, besides providing our Enforcement metrics, reported on the key underlying themes for recurring audit failures
in cases investigated over the past six years. We will publish the next Review in July 2021
to provide updated details on our activities including key themes from cases against
those responsible for preparing and approving nancial statements.
We continue to progress a large number of cases as well as publish details of imposed
sanctions as soon as our publication policies allow. We concluded 55 cases during the
year (up from 44 in 2019/20), through enforcement action or constructive engagement.
Forty-eight cases (up from 31 in 2019/20) were resolved through constructive
engagement, by agreeing bespoke remedial actions with rms, usually on a rmwide
basis, to address the risk of repetition and so drive audit quality. We monitor the agreed
actions and will take further action if the same issues arise in audits subsequently
conducted by the same rm.
Sanctions imposed during the year were dominated by the impact of the record level of
sanctions imposed by the Independent Tribunal in the Autonomy case which, at £15 million,
was 1.5 times the previous highest sanction, reecting the gravity of the Tribunal’s ndings.
The total amount of nancial sanctions before discount (for working constructively with
the FRC) remained consistent, although the amount after discount increased.
The length of a case will vary depending on size and complexity. The eect of the
Covid-19 pandemic on those we regulate, external experts and our own Division,
understandably impacted our ability to progress cases. Despite this, the two-year KPI
target has been met in 40% of cases (44% in 2019/20). Where cases did not meet the
KPI, the reasons included cases still in settlement discussions, the eect of the Covid-19
pandemic (including on the Institute of Chartered Accountants in England and Wales
(ICAEW), to whom a number of cases were delegated) and one high-prole case paused
pending resolution of parallel Serious Fraud Oce (SFO) proceedings.
Turning to our work on corporate governance, the FRC conducted a review of the 2020
AGM season, engaging with a section of stakeholders to identify dierent practices
used throughout the Covid-19 pandemic. The review considered how companies can
embrace dierent levels of new technology, aimed to open up a further debate between
stakeholders to determine how future AGMs can be conducted to ensure maximum
engagement, and assessed the application of virtual and hybrid meetings.
The FRC has also established a culture project this year, following on from our report
in 2016,
Corporate Culture and the Role of Boards.
The team conducted an annual review
of corporate governance in 2020 and noted there was limited meaningful reporting on
culture. It is therefore producing a culture report in partnership with other organisations,
as well as the more practical FRC Culture Toolkit.
3. Enforcement
1 To enable a like-for-like comparison, this gure excludes four individuals who transferred to the Supervision
“We concluded
55
cases during the
year (up from
44 in 2019/20)”
“We hold those
we regulate
to account
where needed
by providing
robust, fair
and timely
enforcement
action.”
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Annual Report and Financial Statements 2020/21
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During the year we closed three legacy cases with their year of opening ranging from
2013 to 2017. Six such legacy cases remain open. In all of these we were, or continue to
be, required to pause our process pending resolution of parallel SFO proceedings.
These sanctions reect those imposed or agreed during the relevant year. In some cases
sanctions were announced in a later year, in accordance with our publication policies.
Cases opened and closed
The Division focused rst on supporting existing and recruiting new sta over the last
year, both through the Covid-19 pandemic and working from home, and with business
objectives through advice and information. Secondly, the Division focused on driving the
modernisation of the FRC by building better and resilient organisational foundations,
ready for ARGA. The teams responded with agility to enable the virtual working and
on-boarding.
Corporate Services contributed heavily to the transformation programme for the FRC,
which is currently out for consultation by BEIS. This will require continuing investment
as our capacity and capabilities grow, leading to increased funding needs. This is set
out in our strategy and plan for 2021/22; this year we will also publish a three-year plan.
From the FRC’s current headcount of 326 we plan to grow to around 417 by March
2022, with some further growth in 2022/23. That further growth will build teams and
procedures for the new activities that we can assume now, such as Public Interest Entity
(PIE) auditor registration and operational separation, but also to prepare for the new
supervisory, regulatory and enforcement regimes and powers in areas subject
to legislation.
8 Number of nancial sanctions imposed
21 Number of non-nancial sanctions imposed
1 Of which: Exclusions
Total nancial sanctions imposed
2020/21
2019/20 2018/19
£16.4m
£11.3m £32.0m
2020/21
2019/20 2018/19
43 Open as at 1 April
41 39
16
14 15
Open
10
13 13
Closed
49 Open as at 31 March
42 41
2
2 Two connected Audit Enforcement Procedure (AEP) cases were counted as a single investigation in 2018/19
and 2019/20 and as two investigations in 2020/21. Extensions to existing cases in the AEP are counted as
new cases as the AEP does not make provision for amendments to scope. From 2020/21 we are consistently
counting these extensions to existing cases in the AEP as separate cases. If 2018/19 and 2019/20 were
restated on a like-for-like basis, the number of cases open at 31 March would be 42 and 43, respectively.
4. Corporate Services
“From the
FRC’s current
headcount of
326
we plan to grow
to around
417
by March 2022.”
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19
In 2020/21, some examples of improved or new initiatives and processes delivered by
the Division included:
• Formalising our processes for the Freedom of Information Act (FOIA) and
commitment to the Regulator’s Code (now under statutory instrument, but formerly
on a voluntary basis)
• Improved procurement processes and Managing Public Money to promote and
protect the public interest
• Refreshed risk approach (reported in the risk section on page 43 below) to strengthen
the resilience of the organisation and support the transformation programme
• Recruitment at scale to add capability and capacity to meet the demands of a
changing organisation, and supporting onboarding of new sta working remotely
• Implementing t-for-purpose governance frameworks
• Setting up centralised complaints and whistle-blower handling (see page 37 below)
• Enhanced market intelligence reporting and market analysis
• A robust annual research plan, aligned to strategic themes
• Working with internal audit and stakeholders to be open to scrutiny
• Introducing further KPIs and Board dashboard reporting.
In our plan and budget we published a set of KPIs and will report our performance to
stakeholders.
Despite the challenges of the last year, we have seen signicantly improved people
survey scores. For example, the number of areas for rapid improvement fell from 21 to
three and we are also reviewing our values and behaviours following strong feedback
from colleagues (see the Our People section on page 21-25 and the diversity statement
for more information on the people survey and other reporting on, for example, our
gender pay gap).
In 2022, a key focus for the Division will be on improving information management to
improve intelligence across the organisation, and our workplace strategy – the working
environment and employer proposition that ARGA will oer as a thought leader and
model of continuous improvement within the public sector. In addition, following an
external review of information and data management we will move to implement new
arrangements and capacity to maximise the value of information in delivering
our objectives.
Sir Jonathan Thompson
Chief Executive Ocer and Accounting Ocer
1 July 2021
“Despite the
challenges of
the last year,
we have seen
signicantly
improved
people survey
scores.”
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4. Strategic priorities for 2021/22
Our
Plan & Budget 2020/21
sets out our priorities for the coming year, which are aligned
with our strategic objectives and transformation programme to ARGA.
A number of our outputs and deliverables remain consistent year to year, particularly
where they relate to our regulatory obligations. However, next year’s growth will be used to
build teams and procedures for the activities that we can assume now, such as PIE auditor
registration and operational separation, but also to prepare supervisory regimes in areas
where we have some early understanding of the Government’s policy intentions but where
we should not yet assume that additional supervisory responsibilities will fall on the FRC in
2022 or beyond. During the transition, we will also be developing and implementing a new
funding model for ARGA, to be put on a statutory footing. We look forward to engaging
with stakeholders on the principles and the details of ARGA’s funding during the year.
What will success look like?
We are keen to be transparent on the deliverables being funded from the budget, and
to track the progress against targets and our expenditure. The following KPIs will be
supported by a wide range of public reports on outcomes and trends we oversee and
identify, for example, disclosing the quality of the audits we review and the lessons
learnt, identifying both the scope of investigations and enforcement and the lessons
to be drawn to rms’ attention, areas of good practice and what can be improved from
our corporate reporting reviews, including our Corporate Governance and Stewardship
Codes. In 2020 we published around 30 such public reports on our work. The KPIs on
which we propose to report at the end of the year will include:
In our reports we will set out our progress but also add commentary and context, including
updates on our transformation programme.
•
Number of Audit Quality
Review (AQR) reports
completed.
•
Number of Corporate
Reporting Review (CRR)
reports completed.
•
Complaints against
professional bodies for
auditors, accountants and
actuaries are investigated
and responded to by the
Professional Oversight
Team within six weeks
•
Constructive engagement
cases concluded within 12
months
•
Enforcement cases settled,
closed or investigation
concluded within two-year
target.
•
Operating costs against
budget
•
Recruitment against
budget
•
FRC complaints responded
to within service level
agreement timeframe
•
Research projects
undertaken.
Supervision
and monitoring
Enforcement
Financial
and operational
performance
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Annual Report and Financial Statements 2020/21
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5.
Our People
For our transformation to ARGA to succeed, we need cohesive, motivated and diverse
teams with the technical skills and practical experience to help us deliver on our new
purpose and expanded activities. This requires our people to be experts in their eld
with the capability and authority to inuence and deliver change across a wide range
of disciplines.
Despite the challenges of the lockdown, recruitment continued at pace throughout
the year. As at 31 March 2021, we had 326 employees (2020: 243). We have worked
hard to ensure that, despite working from home initially, all new joiners received a
comprehensive remote induction and felt integrated into their teams. To promote
interactions with other colleagues across the FRC, several peer groups were set up
across the organisation including the ‘class of lockdown’ sta group and each new
joiner was allocated a buddy from within a dierent team.
In 2021/22, we are seeking to recruit people into new roles to expand our activities and
transform into ARGA. Our Strategy 2021/22 forecasts more than 40 new roles during the
year, in addition to replacing any leavers. We anticipate this growth will take us much of
the way towards meeting the expectations for ARGA’s scope and remit as set out in the
Government’s consultation.
27
Supervision
Division
13
Enforcement
Division
24
Regulatory
Standards
27
Corporate
Services
(including
CEO oce)
6
UKEB
Our people are our strength.
The UK Endorsement Board are included in our nancial statements here and headcount, however are an
independent body in law. The FRC provides central support services under a Service Level Agreement only.
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Sta wellbeing
The Covid-19 pandemic has had a signicant impact on the lives of all our sta; we
have been committed to supporting the physical and mental health of our people and
fostering employee wellbeing throughout the unusual and often dicult circumstances.
Managers had regular check-ins with their sta and sta well-being surveys were
issued each quarter to improve our understanding of the support or exibility that
could be provided to our sta, particularly for those with caring or home-schooling
responsibilities. Surveys on returning to the oce were also conducted during the year
to ensure that sta needs could best be met when the oce reopens.
Mental health rst aiders were trained to provide support to sta who needed it and
they have been a visible and active group over the last 12 months. Other training
opportunities and other activities in this area have been championed by our Diversity
and Inclusion Committee and our Wellbeing Group as well as the leadership team.
Talent management
The FRC supports the continuous knowledge and professional development of sta
through a variety of methods including coaching, mentoring and buddying. We have
introduced training for line managers on career conversations and have developed a
new approach to talent management and succession planning for employees at senior
job levels.
More broadly, the FRC has set up a Learning and Development Steering Group with
responsibility for creating and embedding a culture of learning across the FRC. Learning
and development expenditure over the last year has increased by £66,000. We will
continue to review both our learning and development strategy, and our promotion
and recruitment processes.
Health and safety
At the FRC, we want to provide a healthy and safe working environment for all our sta
and visitors. We introduced additional Covid-19 safety measures in the oce including
increased cleaning, online desk and room booking systems and sanitiser points across
the oor. We provided sta working at home with additional screens, equipment and
ergonomic chairs, and rolled out risk assessments and awareness training to improve
the safety and wellbeing of sta when working from home.
We have a dedicated team of re marshals, rst aiders and mental health rst aiders
to support the sta and record any incidents.
Per employee, the average working days lost to sickness absence for the 12 months
to 31 March 2021 was 3.1 days (2020: 3.9 days)
“The Covid-19
pandemic has
had a signicant
impact on the
lives of all our
sta; we have
been committed
to supporting
the physical and
mental health
of our people
and fostering
employee
wellbeing
throughout the
unusual and
often dicult
circumstances.”
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Gender pay gap
In April 2021 we published our gender pay gap for the year to 31 March 2020. Our
report also included some additional data to end January 2021. The report showed a
substantial reduction in our gender pay gap, which reects the increased number of
women at all levels in our organisation.* Women are now in the majority at every job
level of the FRC except among the four Executive Directors, where only one is a woman.
The attendees of the Executive Committee are balanced equally. Our approach to pay
and reward places much tighter control on setting starting and promotion salaries,
and since 2018 we have used a job levelling framework that maps job level to key
responsibilities to ensure consistency of approach for all employees.
Further reducing the gender pay gap is a key focus that the Board and our
Executive Committee are committed to. At the FRC the gender pay gap is caused by a
disproportionate percentage of women in the lower pay quartile, specically in job level
1 roles where 93% are women and in job level 2 where 60% are women.
The FRC supports exible working arrangements, including accommodating those with
caring responsibilities, and encouraging work/life balance. As at 31 March 2020 21.5%
of employees worked part-time, an increase from 18% in the prior year. Of the part-time
employees, 19% were men.
Diversity
During 2020/21 our Diversity and Inclusion (D&I) work gathered pace, cumulating in a
new three-year strategy that recognises that the organisation is greatly enhanced by
comprising a range of backgrounds, experiences, views, beliefs and cultures.
The FRC is committed to D&I and is a signatory to the Women in Finance and Race at
Work Charters as well as being an accredited Disability Condent employer.
The FRC has a D&I Committee and three Diversity Working Groups on race (Minority Ethnic
Working Group), sexual orientation (LGBTQIA Working Group) and social mobility. To ensure
it is further embedded in the FRC for 2021/2, all sta will have an objective on D&I and
there will be an increased expectation on senior leaders to champion the D&I agenda.
Disclosure of diversity data by sta is voluntary, with 77.7% of sta having disclosed
their information. We will continue to encourage further disclosure as part of setting
and reviewing performance objectives for 2021/22.
In terms of gender balance, at 31 March 2021:
of the Executive Committee were women (2020: 50%)
of the senior managers (including the Executive Committee) (2019: 51%)
were women (38) (37 men) (2020: 29 women and 28 men)
of all sta were women (2020: 59%)
25
%
51
%
57.5
%
31 March 2019:
31 March 2020:
31 January 2021:
Gender pay
gap (median
gures):
* The full report can be found at:
https://www.frc.org.uk/about-the-frc/gender-pay-gap
27.3%
15.9%
4.6%
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Annual Report and Financial Statements 2020/21
24
18 No of sta aged 18-25
127 No of sta aged 26-40
137 No of sta aged 41-55
44 No of sta aged over 55
2020/21
2017/18
57% No of white sta
68%
11% No of asian sta
7%
5% No of black sta
2%
4% Mixed race sta
1%
1% Other ethnicity
1%
23% Prefer not to disclose ethnicity
21%
Disability
The FRC is a Disability Condent accredited employer. Any disabled candidate that
meets the minimum criteria of a job advert is automatically shortlisted for interview or
the rst stage of the selection process.
During the period of this report, and to mark the International Day of Persons with
Disabilities and Disability History Month, we broadcast a podcast with the Chair of the
Civil Service Disability Network to raise awareness of the issues and challenges aecting
employees with disabilities. The FRC also provided unconscious bias training to ensure
that all employees, including those with disabilities, are treated fairly.
Culture
An annual people survey is issued to seek sta views on a wide range of issues to
provide benchmarking data for comparison with previous years and with broader Civil
Service results. The February 2021 survey was externally facilitated by Capita and the
data extracts shown below are based on an 86% response rate.
I am proud to tell others
that I am part of the FRC
I feel that management
are considerate of my
life outside work
I am aware of and
understand the FRC
Values and Behaviours
The FRC inspires me to
do the best in my job
81
%
90
%
84
%
69
%
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Annual Report and Financial Statements 2020/21
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The Executive Committee and Board were pleased with the feedback received from
the survey. The results showed an increased condence in the leadership of the FRC
in terms of responding to colleagues. The number of areas identied as having room
for rapid improvement reduced from 18 in 2020 to three in 2021, showing the positive
impact of the work of focus groups and actions taken in response to the 2020 survey.
Several actions responding to the three areas identied are already in train, including
a comprehensive review of whether the FRC values remain appropriate.
Employee engagement
We engage with our sta through a variety of mechanisms, including through monthly
town halls for all sta, monthly divisional meetings, a weekly email from the CEO, a
weekly internal communications brieng note, the sta intranet and sta surveys. In
addition, there are a number of sta Committees including a People Forum, a D&I
Committee, a Pension Scheme Committee, and a wide range of social groups and clubs.
We also form short-term sta groups as needed to inform the development of new
policies and initiatives; for example, a sta group was established during the year to
review the Values in Practice reward scheme.
The People Forum comprises representatives from all Divisions and is attended by the
Executive. As NED with responsibility for workforce engagement, Jenny Watson attends
People Forum meetings to hear sta concerns, suggestions and innovations.
Voluntary attrition at the FRC is low and reduced during the year to 5.5% from 11.2%
(2020). This may be partly due to the Covid-19 pandemic, but may also reect that
employees are feeling more settled regarding the transition to ARGA and the career
development opportunities that growth in headcount has created. In the 12-month
period ending March 2021, 44 vacancies were lled by internal candidates. In exit
interviews, career progression and a lack of opportunities to progress is the main reason
for colleagues leaving – this is not uncommon in an organisation of our size but remains
an area of focus.
Information on sta remuneration and benets, including pension arrangements, is
included in the Remuneration Report on pages 93-96.
Our employee handbook was updated in February 2021; this contains all sta policies,
including in relation to equal opportunities and diversity, whistle-blowing, harassment,
bullying and discrimination, disciplinary procedures, and information and the General
Data Protection Regulation (GDPR). A fuller review is planned for this year.
The number of
areas identied
as having
room for rapid
improvement
reduced from
18
in 2020 to
3
in 2021,
showing
the positive
impact of the
work of focus
groups and
actions taken in
response to the
2020 survey.
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Annual Report and Financial Statements 2020/21
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6. Section 172 and Stakeholder
Engagement
Section 172 of the Companies Act 2006 (the Act) requires Directors to consider the
interests of stakeholders in their decision-making. In particular, section 172(1) states
that regard should be had to the long-term consequences of decisions, the interests
of the company’s employees, the need to foster the company’s business relationships
with suppliers, customers and others, the impact of the company’s operations on the
community and the environment, and the desirability of the company maintaining a
reputation for high standards of business conduct.
Our direct stakeholders include companies, institutional investors, auditors, actuaries,
accountants and their respective professional bodies. Our indirect stakeholders include
retail shareholders, suppliers, employees, customers, communities, pensioners and
savers, and nancial institutions, all of whom have an interest in the health of companies
and other organisations within our existing and future regulatory scope and in the
success of the UK corporate sector as a whole.
The Directors are fully aware of their responsibilities to promote the success of the
company in accordance with section 172. Consideration of stakeholders’ interests has
always been integral to the work of the FRC and in its decision-making. With this in mind
the Board formalised its approach to stakeholder engagement with the establishment of
a Stakeholder Engagement and Corporate Aairs (SE&CA) function and the adoption of a
stakeholder engagement policy, as described on page 13. The policy identies the FRC’s
stakeholders, their individual interests and how best to engage with each stakeholder
group, while the Board received briengs on stakeholder engagements during year.
Investors
Stakeholders of
regulated entities
NGOs including
environment and
societal groups
Companies
Auditors
Accountants
Actuaries
Investors
as stewards
Our people
Suppliers
Government
and public
sector
International
stakeholders
Community
& environment
The UK Public
What is in the public
interest is at the heart
of what we do and is the
foundation for all
our work.
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Annual Report and Financial Statements 2020/21
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Approach to stakeholder engagement
As highlighted in the CEO’s report on page 13, our new and expanded approach to
stakeholder engagement launched last year, is already providing quick wins and gives us
a strong base to build on in 2021.
Our approach to strategic engagement focuses on:
• Creating a network of advocates
• Soliciting senior level input
• Positioning the FRC as a leader in key debates
• Gathering input into policy-making and consultations
• Driving awareness and engagement with our Codes and best practices
• Ensuring the FRC is a part of relevant decision-making bodies and groups.
Building internal
capacity, intelligence
sharing and processes
Refreshed and
relaunched our internal
talking points, providing
a strong and consistent
narrative
Launched a quarterly
SE&CA summary, to
highlight the work done
by colleagues across
the FRC and to share
the insights gleaned
from engagement
Launched new,
clear and consistent
policies for planning
engagements, allowing
a more coordinated and
thoughtful approach
across the FRC
Senior level outreach
in refreshed groups
Refreshed membership
of the Investor Advisory
Group and Stakeholder
Panel, bringing new
players from across the
ecosystem to the table
Massively increasing our
stakeholder databases,
particularly across FTSE
listed companies
Launched a new Audit
Committee Chair
engagement programme,
which has received
strong feedback from
Audit Committee Chairs.
More and broader
engagement with
stakeholders & events
Higher than ever
engagement levels
with consultations, via
interactive webinars,
round table discussions
and engagements with
external stakeholder
interest groups
Partnered with a range
of new organisations to
give us new audiences
and access to their
stakeholder lists
Increasing both the
range of FRC people and
the number of instances
of FRC people speaking
to industry conferences
and key ecosystem
events
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Annual Report and Financial Statements 2020/21
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We will build on the successes with an expanded engagement work plan, leveraging new
partnerships and opening new engagement channels.
Over the coming year we will continue to:
• Build our networks, both at very senior levels and across all areas of our stakeholder
ecosystem
• Leverage the power of our stakeholder ecosystem to develop advocates for our work
and the issues that are important to us
• Find new partners and maximise our impact in relevant debates and discussions
• Put in place more eective engagement processes, monitoring systems and
information sharing across the FRC
Some examples of how we regularly reach out to key stakeholders are shown below.
We supplement these with regular meetings of our Stakeholder Investor Advisory
Group, Stakeholder Advisory Panel and Audit Chairs Committee, and ongoing ad hoc
relationship management at all levels of the organisation. Besides tactical outreach in
support of consultation programmes, and our own stakeholder events, FRC speakers
attend industry events, conferences, panels and webinars, and we are bringing a wider
range of industry voices to our outreach by building the network and mailing list
through online and social media channels.
At a high level, our engagement work can be broken down into two main streams:
Board consideration of stakeholder matters
The Board carefully considers the impact of its decisions on stakeholder groups and
the Directors acknowledge that, as an independent regulator with a public interest
remit, its decisions will not always be supported by all stakeholders. However, to inform
its decision-making, major policy issues are subject to consultation and responses are
carefully considered. The Board issues feedback statements following consideration of
consultation responses and – these are published on the FRC website.
The Board has a process in place for decision-making, taking account of FRC’s strategic
objectives, to ensure it has condence in the decisions it takes. Board paper templates
require that papers on topics which may aect stakeholders set out the relevant issues
and potential impact. The Board also works to make sure that its decisions are consistent.
This is the work we do to engage with our
stakeholders on an ongoing basis, focused
across our key engagement themes,
including:
• Using the FRC’s Advisory Groups
• Regular contact with key stakeholders
• Our work in public aairs
This is the engagement work we do on
specic policies and projects, for example to
support policy development or consultation
responses, often this is done via:
• Consultations for new codes
• Roundtables and small group
“Strategic” Engagement “Tactical” Engagement
We use a variety of platforms to achieve both “strategic” and “tactical” engagement,
including Teams meetings, FRC hosted webinars, partner organisation webinars and
events, podcasts, social media, press and online media coverage.
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Annual Report and Financial Statements 2020/21
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The FRC has determined ambitions
to reduce its energy consumption and
waste generation, and to build a strong
‘use less, waste less’ culture.
7. Environmental impact
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Annual Report and Financial Statements 2020/21
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“Sustainability
disclosures
recommended
by SASB for
our industry
(Professional
Commercial
Services) have
been included
throughout this
report.”
The FRC has determined ambitions to reduce its energy consumption and waste
generation, and to build a strong ‘use less, waste less’ culture, with the sustainability
of our purchases and supply chains integral to our procurement decisions. The FRC
occupies one oor of 125 London Wall covering 2,010 m2 and all our waste processing
is managed centrally by the building’s facility management company. We work with
them to reach targets of 100% recycling of paper, cardboard, coee pods, printer toners,
lightbulbs and batteries. Single-use catering plastics such as plastic cups and cutlery
are not provided to sta and we no longer purchase plastic document wallets. Water
for meeting rooms is bottled in-house using reusable glass bottles, and soap and anti-
bacterial solutions for sta are provided through large dispensers only.
As a result of growing sta numbers, 182 new computer screens and 97 new laptops
were purchased in 2020/21 and 19 leavers’ laptops were prepared for reuse onsite
during the period. Broken laptops were kept for spare parts and no ICT equipment at
the oce was sent to landll. Old rewalls, switches and other Cisco equipment were
returned to Cisco for reuse or environmentally safe disposal. Our onsite telephone
system was replaced with a more energy-ecient, cloud-based system.
Sustainability disclosures recommended by SASB for our industry (Professional
Commercial Services) have been included throughout this report.
The FRC is reporting under the Streamlined Energy and Carbon Reporting requirements
for the rst time for 2020/21. The consumption information provided below is calculated
for the oor using monthly meter readings provided by the building’s management. The
building’s electricity is supplied by ENGIE who pledge that a set level of that energy will
come from certied renewable energy sources.
As a result of the large majority of FRC sta working from home during the period,
water and electricity consumption at the oce fell by around 22% and 30%, respectively,
against 2019 gures. Gas and air handling unit power use fell only slightly against
2019/20 gures as Covid-19 safety guidelines required increased fresh (rather than
recirculated) air ventilation, which had to be heated or cooled as it entered the building.
Gas consumption also increased during remedial works on the building’s heating system,
which took place in the summer.
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Annual Report and Financial Statements 2020/21
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As a partner organisation of BEIS, the FRC submits information on its emissions
(including estimated emissions from purchased travel), waste management and
procurement practices to BEIS as part of BEIS’ overall data submission to DEFRA, which
sets and monitors the Greening Government Commitments’ sustainability targets. The
FRC is incorporated into the BEIS Sustainability Strategy for 2021/22 – 2025/26 and
benets from sharing sustainability best practices and ideas within the BEIS family
of organisations. The FRC recognises this is a pivotal point in history: a point when
individuals and organisations should be fully cognisant of the threats that climate
change will bring to the way we live and work. We know we have our own part to play in
adapting what we do and how we do it to limit climate change and build our long-term
resilience. While it is not currently identied as a principal risk for us, we are increasing
our conversations about the potential impacts of climate change on the FRC, our
stakeholders and future ways of working. We are incorporating climate change into our
risk considerations at both Board and Executive level in line with the four pillars of the
Task Force on Climate-Related Financial Disclosures (TCFD). A new cross – FRC Climate
Steering Group was established in 2021 with responsibility for leading, and setting the
priorities for, our external work on the future of climate and environmental, social and
corporate governance (ESG) reporting in the UK. The FRC has been in dialogue with
other UK regulators regarding its rst Climate Adaptation report, which is due to be
published in late 2021.
Due to the Covid-19 pandemic and the low occupancy of the oce, no measures were
taken to improve the oce’s energy eciency during the year.
2020/21
2019/20
Scope 1 consumption kWh Natural gas 242,469
233,556
0 0
Scope 2 consumption kWh Purchased electricity 160,826
114,681
Total energy consumption 403,295
348,237
Scope 1 tCO₂e in ktn²
43 45
Scope 2 tCO₂e in ktn
27 41
Total carbon emissions tCO₂e in ktn
70 86
Intensity ratio
(Total kWh consumption by number of sta at year end)
1,068 1,660
2020/21
2019/20
Annual water consumption m³
1,340
1,717
Purchased reams of paper (sustainably sourced) 255
0
Total km sta business journeys
(excluding commutes to the oce)
0 1,318,000³
1. The FRC does not operate its own eet of vehicles.
2. Using published SECR conversion factors for the applicable year.
3. Comprising 70 domestic train journeys, 93 Eurostar journeys, 149 ights to European
locations and 79 long haul ights.
“While it is
not currently
identied as a
principal risk
for us, we are
increasing our
conversations
about the
potential
impacts of
climate change
on the FRC, our
stakeholders
and future ways
of working.”
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Annual Report and Financial Statements 2020/21
32
8. Ethics and Compliance
The FRC is committed to maintaining the highest ethical standards and conduct in
our sta, advisers and decision-makers.
Professional integrity
As noted in the Directors’ Report, all FRC sta and non-executives must comply with the
Code of Conduct and make up-to-date, full disclosures regarding their external interests
and any gifts and hospitality received to ensure that our work remains free from bias.
New sta must disclose their relevant interests prior to contract. This year all sta
interest declarations were moved onto a condential web-based platform to facilitate
updates by sta and checks and approvals by managers when assigning work. Sta are
not permitted to take part in work relating to an entity they have worked for in the last
ve years, unless an exemption request has been viewed and approved by the Executive
Committee.
During 2020/21, the FRC suered no monetary losses as a result of legal proceedings
associated with the FRC’s professional integrity, such as negligence of duty, malpractice,
breach of contract, fraud, corruption or bribery.
Modern slavery
The FRC issued a
Modern Slavery Act statement
in November 2020 demonstrating its commitment to meeting section 54 of the Modern Slavery Act 2015 (MSA). The statement
outlines activities taken to support its commitment and future activities. The FRC does
not condone any activity that constitutes modern slavery or human tracking under the
MSA. Our suppliers (and supply chain) should maintain the same approach and have
policies and procedures in place to minimise the risk of modern slavery occurring.
Procurement and payment policies
The FRC complies with the public sector procurement rules as stipulated in The Public
Contracts Regulations 2015. The FRC’s supplier relationships seek to deliver successful,
sustainable solutions. Existing and new suppliers must continuously align their approach,
processes and procedures to the core principles relating to minimising risk and
compliance with regulations and legislation. In addition, suppliers should strive for good
practice relating to information security, nancial management and business continuity.
It is FRC policy to pay suppliers when or before payments become due and we
endeavour to pay suppliers within 21 days of date of invoice.
Data security
The FRC understands the importance of privacy and maintaining trust in our privacy
practices is key to us. Please see our
Stakeholder Engagement privacy notice
and
Regulatory privacy notice
.
Information and data loss is identied as one of the FRC’s
principal risks and as such is included on the Principal Risk Register. Information risks
and the employed mitigations are regularly reviewed by the Audit & Risk Committee
and the Executive Committee.
“The majority of
the complaints
we receive
that are within
our remit
are reported
matters about
regulated
activities.
We received
604
complaints
during 2020/21.”
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Annual Report and Financial Statements 2020/21
33
The FRC is committed to
maintaining the highest ethical
standards and conduct in our sta,
advisers and decision-makers.
As a growing organisation, the FRC recognises the need to continually adapt and
strengthen our defences against increasingly sophisticated ad hoc and organised
attempts to gain access to our data systems. We maintain extensive IT architecture to
defend the FRC against data loss threats and to provide robust data security whether
sta are working in the oce or from home. The General Counsel Team and IT team
have established a range of information-handling and security procedures and policies
covering both internal and external information sharing. The FRC’s information policy
was revised in early March 2020, in anticipation of mass home working, to highlight new
risks and to remind sta of safe practice. We recognise that our sta are a vital line of
defence against the ongoing threats we face and therefore we conduct routine phishing
recognition tests and provide regular up-to-date training modules on cyber threats for
all sta. GDPR and FOIA training are also mandatory for all sta.
The General Counsel Team and IT team jointly operate an information risk mailbox and
log to assess and manage any breach incidents and any incidents are reported within
the FRC’s KPI management system. There were 14 reports of potential information loss
in 2020/21. Most were reports of emails being sent to the wrong recipient, one was
an incident of automated emails being re-sent to the original recipients and another
reported a phishing email trying to extract details of a ne from a specic investigation.
No condential business information or personally identiable information was lost.
We operate an internal Information Governance Group, which meets regularly to
monitor compliance and to identify areas of increased risk or concern at an early stage
for escalation to the Executive Committee or Audit & Risk Committee.
The General Counsel Team runs an FRC-wide data minimisation programme and a GDPR
risk and assurance programme to test our compliance with the seven GDPR principles.
The team has oversight of all GDPR and FOIA requests and data-handling compliance.
“We recognise
that our sta
are a vital line
of defence
against the
ongoing threats
we face.”
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Annual Report and Financial Statements 2020/21
34
9. Managing complaints to the FRC
The FRC reviews complaints and referrals received from the public in line with its role
in encouraging condence in the integrity of accountants, actuaries, auditing and
corporate reporting. The majority of the complaints we receive that are within our remit
are reported matters about regulated activities. A small number of complaints are also
received about the FRC. A number of complaints are outside of our remit and a large
number of complainants confuse us with other regulators – these complaints we pass
on to the relevant authorities.
This year, the centralised complaints function, implemented following the internal
review and the Kingman Review, has been fully embedded. We continue to monitor its
eectiveness with a view to constantly improving the process and to ensure that we
continue to handle complaints promptly and consistently, with the appropriate triaging,
handling, response and resolution of complaints.
Complaints are triaged to determine whether they fall within our remit, and then referred
for consideration to one of the below teams.
•
Corporate Reporting Review Team:
Responsible for reviewing accounts of listed,
UK AIM quoted and large private companies, as well as limited liability partnerships,
to determine whether they have complied with relevant accounting and reporting
requirements as set out in the Companies Act 2006.
•
Case Examinations and Enquiries Team:
Responsible for identifying cases that
may fall within the remit of one or more of the FRC’s disciplinary or enforcement
procedures (the AEP in relation to suspected breach by statutory auditors of Relevant
Requirements; and the Accountancy and Actuarial Schemes in relation to suspected
professional misconduct by members of the chartered accountancy and actuarial
bodies in public interest cases) for referral to the FRC’s Conduct Committee for a
decision as to whether to open an investigation by the Enforcement Division under
the applicable procedure.
•
Professional Oversight Team:
Responsible for providing independent oversight of
the professional accountancy and actuarial bodies and can consider the way a body
has handled a complaint that was made to it.
Our published policies and complaints forms include clear guidance on how complaints
will be dealt with, including timelines.
“The FRC
reviews
complaints
and referrals
received from
the public in
line with its role
in encouraging
condence in
the integrity
of accountants,
actuaries,
auditing and
corporate
reporting.”
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|
Annual Report and Financial Statements 2020/21
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Complaints
We received 604 complaints during 2020/21, summarised below.
The handling timescales across all cases closed in the reporting period were an average
of one working day to send an acknowledgement letter, and an average of 11.9 working
days for the outcome.
Of the 604 complaints received, 89 were referred to the relevant department within the
FRC for further review, with 515 complaints being outside our remit.
The actions taken in respect of the complaints considered by the FRC during 2020/21
were as follows.
Corporate Reporting Review Team
The Corporate Reporting Review (CRR)Team received 21 complaints related to corporate
reporting matters during the year, of which 11 related to matters in the accounts or
strategic report that we pursued with the relevant company.
• Ten of the 11 were in respect of a wide range of accounting issues including the
non-consolidation of entities, the accounting related to particular transactions,
measurement and valuation issues, and disclosures. Improvements to future
reporting have been made (or agreed to) in one case and four cases were closed
after we determined there was no breach of the relevant reporting requirements.
Brought forward as at 1 April 13
Incoming complaints 604
Outside remit 515
Closed/resolved complaints (within remit) 86
Carried forward as at 31 March (within remit) 16
The types of all complaints received were:
Complaint Nature Number
Conduct or performance of accountant (regulated) 51
Conduct or performance of accountant (unregulated) 57
Conduct or performance of accountant (unknown) 206
Conduct or performance of an auditor 64
Financial reporting 73
Actuarial work 2
Actions of professional body 63
Insolvency Issue 1
FRC 4
Other/unknown 83
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|
Annual Report and Financial Statements 2020/21
36
• We received one complaint relating to information provided in a company’s strategic
report’s section 172(1) statement, but we assessed that there was no breach of the
relevant reporting requirement.
• Nine complaints were not pursued after it was determined from further analysis that
they were either outside of scope or that it would not be proportionate to pursue.
One complaint was not pursued further because the company was in administration.
The complaints came from a diverse range of parties (including private individuals,
investors, fund managers, journalists and other companies) and have involved
companies ranging from private and small AIM companies to FTSE 100 groups.
At the beginning of the year, there were seven open cases relating to complaints about
nancial statements reporting matters received in earlier years. Improvements to future
reporting have been made in three cases, including one where we required the company
to refer to our review in its next annual report and accounts. Two cases were closed after
we determined there was no breach of the relevant reporting requirements. Consistent
with our normal practice, one complaint was not pursued further after liquidators were
appointed to the company. One case is still in progress.
Case Examination and Enquiries Team
The Case Examination and Enquiries Team opened seven complaint cases this year,
one of which was a whistleblowing disclosure. There were also two referrals from a
professional body arising from complaints received by that body.
Eight complaint and referral cases were closed during the year, as follows:
• One case, a professional body referral, was referred to the Conduct Committee, which
decided there was no good reason to investigate.
• One case, the whistleblowing disclosure, was referred to the Conduct Committee,
which decided there was a good reason to investigate.
• One case, in relation to audit, for which constructive engagement was undertaken
with the audit rm.
• One case, where the underlying complaint was potentially within the FRC’s remit,
was closed with no further action taken, as our enquiries found there was no basis or
insucient information to support the complaint.
• Four cases, including one referral from a professional body, that on fuller assessment
related to matters not in the FRC’s remit. Where possible, we referred the complaint
or the complainant to the appropriate regulatory body, which included Recognised
Supervisory Bodies (RSBs) in relation to audit matters that the FRC has delegated to
them), accountancy professional bodies and the FCA.
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Annual Report and Financial Statements 2020/21
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Professional Oversight Team
This year the Professional Oversight Team received 57 complaints about the professional
accountancy and actuarial bodies that we oversee.
The Professional Oversight Team conducted a full review of the professional bodies’
complaints handling process in ten cases, with ve matters still under review at 31 March
2021. Of these, two recommendations were made to the professional accountancy
bodies complained about in relation to their enforcement procedures. None of the
complaints reviewed raised issues of substantive mishandling and no recommendations
for improvements were made in the remaining cases, including four complaint reviews
that were ongoing at the start of the year.
The remaining 42 matters either fell outside the Professional Oversight Team’s
complaints handling review remit or the complainant had not rst exhausted the
professional accountancy body’s or actuarial body’s complaints procedure.
The Professional Oversight Team responded to 85% of complaints within six weeks.
Further information on complaints received by the Professional Oversight Team,
including trends, can be found in within
The Financial Reporting Council’s Oversight
Responsibilities 2020/21
report, due to be published later in the year.
Whistleblowing to the FRC as a prescribed person
Public interest disclosures
Whistleblowing is the term used when an employee passes on information
concerning suspected or known wrongdoing by their employer (also known as ‘making
a disclosure’). The Employments Rights Act 1996, as amended by the Public Interest
Disclosure Act 1998, provides the legal framework for protecting workers from harm if
they blow the whistle. The purpose of a prescribed person is to provide employees with
a way of whistleblowing to an independent body that may be able to act on
those concerns.
The FRC is a prescribed person and individuals working outside the FRC, but in the
accounting, auditing or actuarial professions, may contact the FRC if they want to make
a disclosure about their current or former employer in relation to matters that are within
the scope of the FRC’s regulatory remit.
During 2020/21 the FRC received 67 disclosures in its capacity as a prescribed person. In
respect of the disclosures made, the following action was taken:
• Fifty-three related to issues not within the remit of the FRC, but the whistleblowers
were signposted to the relevant bodies where appropriate.
• Six were of direct relevance to the FRC’s responsibilities and were addressed by the
relevant teams.
• Eight did not respond to requests for further information.
The FRC’s whistleblowing policy can be found at
www.frc.org.uk/whistleblowing
“The FRC’s
whistleblowing
policy can be
found at www.
frc.org.uk/whis-
tleblowing”
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Annual Report and Financial Statements 2020/21
38
Complaints about the FRC
During 2020/21, four new complaints were received about the FRC. None raised
signicant issues of wider concern and were handled under the FRC Complaints
Procedure.
Concerns were raised regarding:
• The complainants were unhappy that their complaint needed to be handled by a
professional body rather than the FRC
• Lack of a response to a query
• Dissatisfaction with a procurement tender process
All of the complaints have been reviewed, investigated and responded to. One
complainant exercised their right to have their complaint escalated to the Independent
Complaints Reviewer, who FRC found had acted in line with our procedures.
During the course of the year, two historical complaints were passed to the Independent
Complaints Reviewer. Neither were upheld and the FRC was found to have acted in
accordance with our processes.
“During
2020/21, four
new complaints
were received
about the FRC.
None raised
signicant
issues of wider
concern...”
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Annual Report and Financial Statements 2020/21
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The FRC reviews complaints and
referrals received from the public in line
with its role in encouraging condence
in the integrity of accountants, actuaries,
auditing and corporate reporting.
FRC
|
Annual Report and Financial Statements 2020/21
40
“Our Strategy
2020/21 set out
our Budget and
Levies for the
year.”
Financial overview
We set an operational budget of £45.4m for 2020/21. Of this, £43.1m was for FRC
regulatory activities, to be funded from market participants, and £2.3m for the
establishment of the UKEB to be funded, with BEIS approval, from FRC reserves.
We managed within our core budget while recruiting additional sta to deliver our
regulatory priorities and continue the transition to ARGA, and we did not seek additional
resources from stakeholders. During 2020/21, the FRC broke even. The cost of the UKEB
function was £1.6m (£0.7m under budget) and was covered as planned from our
general reserves.
2020/21 2019/20
£’000 £’000
Funding Received
38,034
39,523
Expenditure
(39,648)
(38,861)
Surplus / (call on reserves) for the year
(1,614)
693
10.
Financial review
Our Strategy 2020/21 set out our Budget and Levies for the year. This explained
that we would increase our budget and the amount we would request from our
stakeholders to fund our regulatory activities, continue the transition to ARGA
and implement new responsibilities following the UK’s exit from the EU Exit.
The latter included the establishment of the UKEB to endorse IFRS standards
within the UK.
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Annual Report and Financial Statements 2020/21
41
Expenditure
Overall expenditure for the year saw a small increase on the prior year to £39.6m
(2019/20: £38.9m) of which £37.1m related to operating costs before cost of
Enforcement case activity.
Sta costs increased by £5.4m to £29.2m due to an increase in headcount during the
year from 243 to 326 at 31 March 2021.
The impact of the Covid-19 pandemic for the 2020/21 nancial year reduced our
expenditure on travel and events. It also signicantly reduced our facilities costs.
The successful arrangements for remote working enabled us to reassess our estate
management needs and, as a result, we decided not to take up the additional oor
space we had provided for in our budget.
The budget for enforcement case costs of £5.5m was based on an estimate of
the expected cost of accountancy cases after considering any costs awards. Cases
successfully pursued by our Enforcement Division saw sanctions to the value of £16.4m
during 2020/21 and case costs of £9.2m (2019/20: £9.4m), oset by case cost awards of
£6.6m. At the end of the nancial year cost awards totalling £0.3m had been nalised,
but had not yet reached our bank account, and these therefore appear in our Balance
Sheet as at 31 March 2021 as debtors.
In all cases, costs awards are paid to the RSB who funded the investigation (the relevant
RSB). Financial sanctions in AEP cases are remitted to the Treasury. In Accountancy
Scheme cases, nancial sanctions are paid to the relevant RSB.
For Actuarial Scheme
cases, nancial sanctions and costs awards are retained by the FRC as the funders of these
investigations.
Expenditure across our main areas of responsibility is shown below.
* Cost Awards may vary signicantly between two years depending on the size and
number of cases concluded
“Overall
expenditure for
the year saw a
small increase
on the prior
year to
£39.6m
(2019/20:
£38.9m)
of which
£37.1m
related to
operating costs
before cost of
Enforcement
case activity.”
2020/21 Actual £’000
10,937 Regulatory standards
18,477 Supervision
1,850 Actuarial standards & regulation
4,181 Enforcement core
2,592 Accounting case costs (Net of cost awards)*
1,611 UK Endorsement Board
39,648 Total
2019/20 Actual £’000
10,740 Regulatory standards
15,708 Supervision
1,923 Actuarial standards & regulation
2,882 Enforcement core
7,608 Accounting case costs (Net of cost awards)*
- UK Endorsement Board
38,861 Total
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Annual Report and Financial Statements 2020/21
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Funding
The FRC does not receive direct Government funding. We are mainly funded by the audit
profession through statutory arrangements and by other groups – the accountancy and
actuarial professions, accounts preparers, insurance companies and pension schemes –
through non-statutory arrangements agreed with Government.
Other income includes income from publications and electronic rights, and registration
fees from third-country auditors.
During 2020/21, the FRC received total funding of £38m from the following categories:
Reserves
The FRC currently holds £14.8m of reserves which, as set out in previous Annual Reports,
were established to cover enforcement case costs that are not recovered from audit
professional bodies, unforeseen costs arising from our regulatory activities and the
impact of any shortfall in our revenue, particularly from the voluntary elements of our
funding. As a public body, operating under a remit letter from BEIS, the FRC works with
BEIS to ensure that any use of the reserves is in line with HM Treasury and Cabinet Oce
requirements.
£18.1m
Accountancy
Bodies
£20.2m
Accountancy
Bodies
£2.2m
Actuarial Funding
Groups
£2.4m
Actuarial Funding
Groups
£15.4m
Preparers
£14.4m
Preparers
48
%
51
%
6
%
6
%
41
%
36
%
5
%
7
%
£2.3m
Other
£2.5m
Other
2020/2021 Total £38m
2019/2020 Total £39.5m
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Annual Report and Financial Statements 2020/21
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11. Risk Management
Throughout the year we have continued to enhance and improve our risk management
framework to identify and manage risks that may prevent us from delivering our strategy
or serving the public interest. We have:
• Introduced a new risk management framework, detailing expected standards and
behaviours for managing risks eectively;
• Agreed a risk appetite statement, benchmarking risks against qualitative thresholds
to understand where we can aord to take greater risk or need corrective action;
• Strengthened governance arrangements, initiating regular risk reviews at the Audit
and Risk Committee and periodic deep dives, sponsored by the Executive Directors,
to ensure risks are managed consistently and proportionately. ;
• Enhanced risk reporting, providing a systematic view of risks, trends and greater
insight enabling decision-makers to better evaluate aggregated risks and the impact
of actions to the achievement of FRC objectives;
• Conducted de-escalation processes and risk identication sessions with the Executive
Committee and the Board to identify emerging threats and ensure that risks remain
relevant and managed at the appropriate level. This has helped us to de-escalate 4
risks (three principal risks), close another and identify 22 new risks (two principal risks)
over the course of the year;
• Stress-tested plans by horizon scanning internal macroeconomic and event-driven
scenarios such as climate-related risks and enhanced business continuity plans;
• Supported the development of cross-Government risk networks and risk maturity
models to share best practice, advise on risk management standards and drive eorts
to support the reliance and professionalism of risk management across government;
• Assessed our risk maturity against HM Treasury’s Orange Book (guidance that
establishes the concept of risk management principles in Government bodies),
identifying areas of strength and opportunities for continuous improvement;
• Delivered training to ensure sta have the skills, knowledge and tools to manage risk
in line with FRC’s risk appetite;
• Developed an assurance framework and plan to enable sucient, continuous and
reliable assurance on organisational stewardship and further embed the ‘three lines
of defence’ model;
• The Board, supported by the Audit and Risk Committee, monitors the risk
management and internal control system and has reviewed its eectiveness this year.
There has also been an internal audit into risk management. Both reviews concluded
FRC has an eective risk management framework.
“We have
continued to
enhance and
improve our risk
management
framework
to identify
and manage
risks that may
prevent us
from delivering
our strategy
or serving the
public interest.”
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Principal risk
Due to political and other
pressures, regulatory reforms
are delayed or ineective so fail
to improve public condence in
the regulatory regime and the
FRC/ARGA
Due to ineective standards
or failure to communicate
Codes, Standards and Guidance
fails to drive the necessary
behaviours and outcomes
to deliver consistently high
standards in the public interest
and improve condence in the
regulatory regime
Corporate reporting and audit
quality remains inconsistent,
resulting in in material
misstatements in some
accounts, resulting in reduced
investor/stakeholder/public
condence and reputational
damage to the FRC
Audit market is severely
disrupted by the failure of
a major audit rm or their
withdrawal from all or part
of the market
1.
2.
3.
4.
Top 3 mitigations
· Government response to Kingman, Brydon
and the CMA reviews published for
consultation on 18 March 2021
· Audit Reform Programme Board running a
programme to deliver the recommendations,
the outcomes from the consultation
document and implementation thereafter
· Extensive stakeholder engagement in place
for last six months and future plan to gauge
reaction to the consultation document in
place
· Corporate Governance Code monitoring to
provide an evidence base for public reporting
in a way that drives higher quality, evidence-
based Code reporting
· Engagement with Stewardship Code
signatories to set clear and challenging
objectives supporting high-quality
stewardship outcomes, supported by public
reporting
· Stakeholder engagement to set clear
expectations and drive behaviours, supported
by our revised stakeholder engagement
strategy
· FRC increasing intensity of its forward-looking
supervision of the major audit rms
· Failures to comply with standards are
identied and referred as appropriate for
Enforcement action
· We revise standards based on feedback
work, to address failures or poor quality
· FRC actively monitors whether major audit
rms have eective recovery plans
· Government White Paper addresses the
mitigating the eects of a Big Four failure
· Increased supervision of medium-sized rms
to ensure the necessary quality of audits
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Annual Report and Financial Statements 2020/21
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Principal risk
Failure to maintain data privacy/
condentiality, due to un/
intentional ex/internal release
of data including through
cyberattack, results in loss
of sensitive data (personal/
corporate), breach of law/
regulation, nes and without
reputational damage
As a result of limited
information sharing and lack
of a holistic overview, we fail
to proactively exploit data/
information that reduces
organisational eectiveness
with potential reputational
damage
We do not receive timely
decisions or practical support
from Government in meeting
our governance obligations, or
are subject to constraints on
our operations, limiting
our ability to discharge our
regulatory duties eectively
with reputational damage
Impact
Very high
High
Medium
Low
Very low
Key
Improving Static Worsening
5.
6.
7.
Top 3 mitigations
· Strengthened cyber-security measures to
mitigate the risk of sta working from home
· Continued security awareness training and
testing
· Enhanced rst-line controls and second-line
assurance and service support monitoring
controls
· Carrying out an FRC-wide information needs
assessment
· Developing an information management
strategy, assisted by an external review
· Enhancing internal data analytics and
intelligence capabilities
· Escalating key decisions around bottlenecks
internally and externally
· Adapting internal rules to ensure we can still
operate
· Collaborating closely with Government on
joint resourcing needs while remaining agile
Principal risks likelihood
Very unlikely Unlikely Possible Likely Very likely
4. 5.
2.
6. 3.
7.
1.
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Annual Report and Financial Statements 2020/21
46
Principal risks mitigated to tolerance
During the year, we de-escalated three principal risks. Those risks were:
•
Failure to retain, recruit and motivate high-quality people,
by successfully
increasing our headcount to over 300 and developing our people policies;
•
Governance/Executive members taking decisions not in line with FRC’s purpose,
by completing public consultation on the revised governance structure; and
•
Covid-19:
while we are indirectly aected by Covid we have mitigated the risk to
tolerance by invoking business resilience plans, successfully operating from home
and collaborating with Government and other regulators to provide high-quality and
proactive guidance based on evidence from audit rms, companies and investors.
The Directors consider that the Strategic Report set out in pages 4-46 is fair, balanced
and understandable and that it contains the information necessary for the user to assess
the position, performance, business model and strategy of the FRC. It was approved by
the Board of Directors on 1 July 2021 and signed on its behalf by:
Sir Jonathan Thompson
Chief Executive Ocer and Accounting Ocer
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Annual Report and Financial Statements 2020/21
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Governance
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Annual Report and Financial Statements 2020/21
48
12.
Governance and transparency
The FRC is a central government body and a private company limited by guarantee.
It reports to the Secretary of State for BEIS and Parliament on the discharge of its
functions. The Secretary of State for BEIS appoints the Chair and NEDs to the FRC Board,
which is responsible for the FRC’s strategy and monitoring its implementation.
The Chief Executive, as the Accounting Ocer, is personally responsible for safeguarding
the public funds under his control, for ensuring propriety and value for money in the
handling of those public funds, and for the day-to-day operation and management of
the FRC. The Chief Executive has a responsibility to the Permanent Secretary of BEIS as
the Principal Accounting Oce for all public bodies in the BEIS family and delegates
powers direct to the Chief Executive through a Framework Agreement.
As a Central Government Body, the FRC seeks to comply with the principles of the Code
of Good Practice: Corporate Governance in Central Government Departments as far as
is appropriate given the FRC is not a Government Department. Our Board members
comply with the Nolan Principles of Public Life and the organisation is compliant with
Managing Public Money. As a company, the FRC conforms to the requirements of the
Companies Act 2006. The FRC is also compliant with the Alexander Tax Review and the
MacPherson Review of Quality Assurance (QA) of Government Analytical Models.
How we are governed
The FRC is headed by a Board that has responsibility for establishing values, culture
and strategy and ensures the necessary resources are in place for the business to meet
its strategic objectives. The Board provides strategic leadership and is also responsible
for the organisation’s risk strategy and risk appetite, given its purpose, values and
objectives. It is not responsible for making enforcement decisions, but receives update
on the cases and investigations.
The roles of the Chair and the Chief Executive are held separately, ensuring a clear
separation of responsibilities. The Chair leads the Board and ensures its eectiveness,
and the Chief Executive is responsible for the executive management and performance
of the FRC’s operations. More information could be found at
www.frc.org.uk.
The Executive Committee, led by the Chief Executive, is responsible for managing the
operations of the FRC in accordance with the Framework Agreement agreed with BEIS,
the requirements of the Managing Public Money principles and adhering to additional
instructions and guidance issued from time to time by BEIS, HM Treasury and the
Cabinet Oce, while maintaining the FRC’s position as an independent regulator.
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Governance diagram
Following consultations in 2020, the Board agreed amendments to the governance
structure to enhance the eectiveness, speed and responsiveness of the organisation,
while establishing clearer lines of accountability and empowering the Executive through
the establishment of Board Committees populated solely by Board members and the
establishment of an Advisory Panel to replace the Advisory Councils, Audit Quality
Review Committee, Corporate Reporting Review Committee, Case Management
Committee and Financial Reporting Review Panel.
The Board discharges some of its responsibilities directly and others through its two
governance Committees and three regulatory Committees. The three regulatory
committees are supported by Senior Advisors and the Advisory Panel to provide input on
a range of matters. The Governance Handbook sets out a schedule of matters reserved to
the Board and terms of reference for the committees. The Handbook, and biographies for
the Senior Advisors and the Advisory Panel can be found at
www.frc.org.uk
.
Our Board and Committee structure
(from 1 April 2021)
“In light of the
recommendat-
ion from the
Kingman review,
the Board
agreed to
review its
governance
structure”
FRC Board
Regulatory Standards
& Codes Committee
Role: regulatory
standards and codes
functions
Supervision
Committee
Role: supervisory
and monitoring
functions
Executive Committee
Role: manages day to
day operations –
resources, policies
and programmes
Non-executive Advisory Panel
A pool of subject specialists
to be called on by the
Executive/Committees
Conduct Committee
Role: enquiries,
investigations
and enforcement
functions
People Committee
Role: remuneration,
succession
planning and talent
management
Audit & Risk
Committee
Role: assurance of
audit and risk control
functions
Enforcement
Committee Panel
(arms length)
Tribunal Panel
(arms length)
Senior Advisors
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Governance statement
As the body responsible for the UK Corporate Governance Code, the FRC seeks to apply
the principles of the Code as far as is possible and appropriate for a central Government
body that is also a private company limited by guarantee. The FRC has embraced the
exibility oered by the Code and has developed governance processes and practices
that address its particular situation. An example is the decision taken by the Board in
2020 to create a People Committee to replace the Nominations and Remuneration
Committees to reect the reduced scope and remit of the two Committees when
operating as a central Government body.
This Annual Report has been prepared with reference to the Code and the Code of Good
Practice: Corporate Governance in central government departments (the Codes) where
applicable. Our statement of compliance (together with the wider Corporate Governance
Report and other sections of this Annual Report) describes how we apply the principles
set out in the two Codes.
The statement on the next page provides a clear and detailed explanation of where, as
a result of our particular circumstances, we have departed from the Codes. It is also
important to note that while the FRC is in a period of transition, there are a number of
temporary departures.
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Statement of compliance
The tables below summarise areas of compliance and departures from the UK Corporate
Governance Code and the Code of Good practice: Corporate Governance in central
government departments.
UK Corporate Governance Code
1. Board Leadership and Company Purpose
A. Eective and entrepreneurial Board Pages 59-75
B. Purpose, value and strategy Pages 70-71
C. Resources and controls Pages 70-71
D. Engagement with stakeholders
E. Workforce policies and practices Pages 88-92
2. Division of Responsibilities
(link)
F. Role of the Chair Pages 65-66 with specic departure explained on page 53
G. Board membership Page 64 with specic departure explained on page 53
H. Role of the Non-Executive Director
I. Board information, time and resource Pages 64-66
3. Composition, Succession and Evaluation
J. Appointment to the Board Page 64 with specic departure explained on page 54
K. Board composition Page 64 with specic departure explained on page 54
L. Board evaluation Page 75 with specic departure explained on page 54
4. Audit, Risk and Internal Control
M. Internal and external audit functions Pages 82-86
N. Fair Balanced and Understandable Page 46
O. Risk management Pages 43-46 and 82-86
5. Remuneration
P. Aligning remuneration to strategy
Q. Policy for executive remuneration
R. Independent Judgement
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A summary of departures from the UK Corporate Governance Code and the Code of
Good Practice: Corporate Governance Code for Central Government Bodies is listed on
the following pages.
Code of Good practice: Corporate Governance in central government department
1. Parliamentary Accountability
1.1 Ministerial responsibility to Parliament Page 48
1.2 Accounting Ocer responsibility Page 48
2. Role of the Board
2.1 Board leadership Pages 48-49
3. Board Composition
3.1 Skills, experience and diversity Pages 59-63
3.2 Roles and responsibilities Pages 48-49 and 65-74
4. Board Eectiveness
4.1 Eective discharge of its responsibilities Pages 65-74
5. Risk Management
5.1 Eective arrangements Pages 43-46 and 82-86
5.2 Governance Statement Pages 50-54
6. Arm’s Length Bodies
6.1 Ensuring robust governance arrangements Pages 48-64
6.2 Terms of relationship with the sponsoring department Page 48
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UK Corporate Governance Code: Board leadership and Company purpose
Principle D:
Eective engagement with shareholders. As a private company limited
by guarantee the FRC has no shareholders. However, as a central Government body
the FRC presents its Annual Report and Accounts to the Secretary of State for BEIS
and the Directors full their s172 duties to promote the success of the company and
take account of the views of a wide range of stakeholders. For example, the FRC has
a commitment to seek views from its stakeholders and those it regulates to ensure its
actions are proportionate and targeted. The FRC has set up several advisory groups and
panels. These include an Investor Advisory Group, which provides a regular forum for the
FRC to engage with representatives from across the investment chain on various issues,
and the Stakeholder Advisory Panel, which provides insights and input into our work
from a broad range of stakeholder representatives to ensure we focus on the needs of
society in pursuit of our mission. We also discuss our approach with other regulators
and have in the past targeted the public via the use of citizens juries. Engagements
include stakeholder roundtables, formal and informal consultations and general catchup
sessions with both senior leaders and the workforce - more information on stakeholder
engagement can be found on pages 26-28. Throughout this Annual Report we explain
how this principle has been applied and the impact this engagement has had on our
operations and policies.
UK Corporate Governance Code: Division of responsibilities
Principle F:
During 2020/21 the FRC was without a Chair from June to September 2020.
In October 2020 the Secretary of State appointed Keith Skeoch as Interim Chair whilst
a recruitment exercise to appoint a permanent Chair was undertaken. At the date of
his appointment, Keith was considered to be independent as he had worked with the
CEO and Accounting Ocer Sir Jon Thompson for only one year, and his term, which
included eight years as a NED, did not exceed nine years.
Principle G:
Combination of Executive and Non-Executive Directors. The FRC is going
through a period of transition and at present does not have a Senior Independent
Director; historically, this role has been fullled by the Deputy Chair. Since the departure
of the Deputy Chair in April 2019, the role has been vacant and appointment of the new
Deputy Chair is a matter for the Secretary of State.
Principle H:
NEDs should have sucient time for their role. The Secretary of State
appoints NEDs to the Board and must ensure they are able to commit to the time
required for the role before appointment. Post appointment this is monitored by the
People Committee, which considers any proposed new external appointments of the
FRC’s NEDs prior to their acceptance.
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UK Corporate Governance Code: Composition, succession and evaluation
Code Of Good Practice: Corporate Governance In central government departments*
Principle 3.1:
As the FRC is not a government department, some of the principles, for
example that the composition of the Board should include the department minister and
permanent secretary, are not applicable.
Principle J
Principle 4.1:
Appointments to the Board should be subject to a formal,
rigorous and transparent procedure.
Principle K
Principle 4.1:
The Board and its committees should have a combination of
skills, experience and knowledge.
Appointments to the FRC Board are made by the Secretary of State in accordance with
the Public Appointments Process and so this is not directly within the FRC’s control.
However, the Chair, with the People Committee, regularly reviews the skills mix on the
Board and can reect this through their participation in any appointment processes.
Principle L
Principle 4.2:
Annual evaluation of the Board.
The Board took the decision to defer the 2020/21 eectiveness review for two reasons.
Firstly, as a result of the delays in the recruitment of NEDs, which led to a temporary
reduction in their number; and second, in recognition that a new governance structure
would be implemented in a phased approach from 1 January 2021. The next review is
expected to take place during 2021/22 once the Chair and newly appointed NEDs have
had time to settle into the role. This will be a good opportunity to consider how the new
members of the Board and Committees are working together and the eectiveness of
the new governance structure.
UK Corporate Governance Code: Audit, risk and internal control
Provision 24:
Composition of the Audit and Risk Committee
For a period of six months, following the departure of Nick Land (NED and Audit
Committee Chair) on 31 March 2020, the membership of the Audit Committee did not
include a member with recent and relevant nancial experience. However, in September
2020 Micheal Hearty was appointed as co-opted member of the Committee. Michael
is a former Finance Director General and brings extensive public sector experience in
strategic and operational leadership across several large and complex government
departments. His appointment lls the skills and experience gap that was missing
following Nick Land’s departure.
Provision 30:
Assessment of the company’s position and prospects.
The nancial statements conrm that it is appropriate to adopt the going concern basis
of accounting. However, as a Central Government Body under the sponsorship of BEIS
both now and after the transformation into the ARGA, the FRC has not provided an
assessment of its prospects over the longer period. We will continue to work with BEIS’s
support both during the period of change and afterwards.
*Departures marked in italics
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UK Corporate Governance Code: Remuneration
Principles P, Q and R:
Remuneration of directors. Directors.
As a Central Government Body, the FRC must follow Public Sector Pay Guidelines and
there is greater oversight from BEIS, HM Treasury and the Cabinet Oce in relation
to remuneration decisions across the organisation. With limited ability to determine
remuneration for the executive, the organisation has a People Committee that is
responsible for agreeing submissions/proposals to BEIS regarding sta pay awards and
to advise the Secretary of State on the proposed fees for Directors. These proposals
are considered by benchmarking the organisation against similarly paid professionals
within the sector and NEDs at equivalent organisations. Further detail on the work of the
People Committee is set out on pages 87-91.
Sir Jonathan Thompson
Chief Executive Ocer and Accounting Ocer
As the body responsible for the
UK Corporate Governance Code,
the FRC seeks to apply the principles
of the Code as far as is possible and
appropriate for a central Government
body that is also a private company
limited by guarantee.
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13.
Our Executive Committee
Sir Jonathan Thompson
Chief Executive Ocer
and Accounting Ocer
Appointed October 2019
Role
Sir Jon is CEO and Accounting Ocer.
He leads the Executive team and is
responsible for implementation of the
agreed strategy. As Accounting Ocer
he ensures the FRC is run in accordance
with the Framework Agreement agreed
with BEIS, the requirements of the
Managing Public Money principles as
well as any additional instructions and
guidance issued from time to time by
BEIS, HM Treasury and the Cabinet
Oce, while maintaining the FRC’s
position as an independent regulator.
Experience
Prior to joining the FRC, Jon was the
CEO of HMRC, the UK tax authority,
collecting more than £625bn, employing
more than 65,000 people and driving
reform of the UK tax system. Before
HMRC, Jon was Permanent Secretary of
the Ministry of Defence, jointly leading
the £36bn organisation with the Chief
of Defence Sta. Jon has had a lengthy
nance career including as Director
General, Finance at the MoD, Director
General, Corporate Services at the
Department for Education and Finance
Director of Ofsted. Before joining the
civil service in 2004 Jon held a number
of corporate services and nance roles
in the public and corporate sectors.
Executive Director,
Regulatory Standards
Appointed July 2020
Role
Mark leads the FRC’s Technical and
Public Policy Division covering audit,
corporate reporting, corporate
governance and stewardship, actuarial
and the FRC Lab. The Division also
includes the FRC’s Stakeholder
Engagement Team. Prior to joining the
Executive Committee, Mark led the FRC’s
UK Audit Policy Programme and work
to support the reform of international
standard setting for auditors by global
regulatory authorities. He represents
the UK on the National Standard Setters
liaison groups for the IAASB, and the
IESBA, and has served on the IASB’s
Accounting Standards Advisory Forum.
Experience
Before joining the FRC, Mark was a
Director at the UK National Audit Oce,
Leading the audits of a number of major
government departments. For ve
years, Mark was a member of the UK
Government’s counter-fraud taskforce.
He is a former Chair of the International
Colleges of Auditors of several European
defence-related organisations. Mark
is an Independent Governor, Board
Member and Chair of the Audit and
Risk Committee of the Westminster
Foundation for Democracy, which is the
UK public body dedicated to supporting
democracy around the world.
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Executive Counsel and Executive
Director of Enforcement
Appointed August 2018
Role
Elizabeth leads the FRC’s Enforcement
Division and is responsible for decisions
in relation to enforcement proceedings
involving auditors, accountants and
actuaries.
Experience
Elizabeth spent 30 years at Slaughter
and May, including 27 years as a
partner, and was Head of the rm’s
Dispute Resolution Group between
2004 and 2008. Her practice spanned
a broad range of complex litigation
and contentious regulatory matters in
the commercial and nancial sectors
covering both private and public law.
General Counsel and Executive
Director of Corporate Services
Appointed September 2020
Role
Alex is responsible for the Corporate
Services Division, which comprises
the General Counsel’s Team, Finance
(including risk, procurement, and
facilities), Human Resources, Information
Technology and Economics, Strategy
& Analytics. The role is newly
established and brings together the
professional and support services for
the FRC. Its eectiveness is critical to the
transformation programme to the new
regulator.
Experience
Alex joined the FRC in September
2020, prior to which he was the Chief
Corporate Aairs Ocer, and an
Executive Board Director, at the Financial
Services Compensation Scheme. (FSCS).
As a lawyer, Alex was rstly head of
legal at FSCS, but in various roles over
20 years worked on a wide range of
nancial services issues, particularly
those concerned with actual or potential
consumer detriment, across investment
business, insurance and banking,
and often collaborating closely with
Government, regulators and industry
stakeholders.
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Executive Director,
Supervision
Appointed September 2019
Role
David is responsible for the
FRC’s Supervision Division, which
comprises Audit Quality Review,
Audit Firm Supervision, Audit Market
Supervision, Professional Oversight
and Corporate Reporting Review. The
aims of the Division are to ensure
corporate reporting complies with
relevant requirements and promote
improvements; to supervise audit rms
alongside an expanded programme
of audit inspections, addressing both
audit quality and audit market resilience,
and to oversee the regulatory work of
the professional bodies for auditors,
accountants and actuaries.
Experience
David is on secondment from the Bank
of England’s Prudential Regulation
Authority, where he was previously
Executive Director of Insurance
Supervision. Previously he was Executive
Director Prudential Policy and Director,
International UK Banks Supervision.
He worked for the former Financial
Services Authority as Head of the Macro
Prudential Department and was Chief
Executive of the International Securities
Lending Association. He has a degree in
Modern History and further degrees in
Political Science and Economics.
Key areas of focus during
the year
Areas of work and time spent by the
Executive Committee
*A separate Transformation Board
was established to discuss the
Transformation Project.
In addition to matters considered at
formal management meetings, the
Committee receives Board meeting
agendas and considers, and comments
on Board reports prior to issue.
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14.
Our Board Members
(At 1 July 2021)
Audit & Risk
People
Conduct
Regulatory
Standards & Codes
Supervision
Bold and black
keyline
denotes
Chair of the
Committee
Full biographical
details of each
Director are
available at
www.frc.org.uk
Key to
Committees
RSC
P
AR
S
C
Interim Chair
Appointed 12 October 2020 (previously
an Independent NED from 1 March 2012
to 31 July 2020)
Experience
Keith is a former CEO at Standard
Life Aberdeen and brings 15 years
of experience of operating as a PLC
director in the UK and India. He also
brings deep experience in economics
and nancial markets and best practice
in stewardship. He has in-depth
knowledge of the asset management,
life insurance and pension industries,
and his advice has been particularly
important when working on the new
Stewardship Code.
External appointments
Keith is currently the Chair of the
Investment Association, Director of
Standards Life Foundation (charity),
Trustee of Edinburgh International
Festival and Chair of HMT’s independent
review panel on ring-fencing and
proprietary trading.
Sir Jonathan Thompson
Chief Executive
Appointed 1 October 2019
Experience
Sir Jon brings experience of working
with government bodies and has
enjoyed a lengthy career in nance. Prior
to joining the FRC, Jon was the CEO
of HMRC, and previously Permanent
Secretary of the Ministry of Defence. He
has extensive experience of delivering
change and programme management,
as well as deep experience of
nance and corporate governance
as a former Head of the Government
Finance Function and the CFO of four
organisations.
External appointments
Sir Jon is the Chair of Crown Hosting
Data Centres Ltd, an unpaid position.
On 1 April 2021, Sir Jon was appointed
as a NED of High Speed 2 (HS2) Ltd.
RSC P
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Independent Non-Executive Director
Appointed 1 May 2014
Experience
As the former Global Managing
Partner at Cliord Chance, David brings
strong expertise in corporate law and
regulation. In particular, his experience
has enabled him to exercise eective
oversight of the FRC’s enforcement
and monitoring activities and lead an
eective Conduct Committee.
External appointments
None
Independent Non-Executive Director
Appointed 23 July 2015
Experience
John is a former CEO of Swiss Re,
a global reinsurer, and the Pension
Insurance Corporation, a specialist
UK insurer, and has experience of
international practices of corporate
governance and reporting. During his
executive career, and subsequently
he has had a strong interest in the
ways business can make a positive
contribution to, and benet from,
the management of environmental
risk. His wide-ranging skills and
experience have helped in making
a valuable contribution in meeting
the responsibilities of the Audit &
Risk Committee and the work of
the Regulatory Standards & Codes
Committee.
External appointments
John is a NED of Ecospray Ltd.
P
C
RSC
AR
S
Audit & Risk
People
Conduct
Regulatory
Standards & Codes
Supervision
Bold and black
keyline
denotes
Chair of the
Committee
Full biographical
details of each
Director are
available at
www.frc.org.uk
Key to
Committees
RSC
P
AR
S
C
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Independent Non-Executive Director
Appointed 24 June 2021
Experience
Hannah was the inaugural CEO of the
Payment Systems Regulator, where
she built a high-performing regulator
from scratch to drive innovation and
competition in the UK payments
industry to the benet of consumers.
She brings signicant experience of
developing, implementing and enforcing
regulatory regimes and inuencing
public policy. She has also held senior
roles at Ofgem, ORR and the Jersey and
Guernsey Competition and Regulatory
Authorities.
External appointments
Hannah is currently a non executive
director of Thames Water Utilities Ltd
and National Grid Electricity System
Operator, Council Member and Trustee
of the Regulatory Policy Institute
CBE
Independent Non-Executive Director
Appointed 1 April 2018
Experience
Dame Julia brings experience of
broader civil society, having been
the Chief Executive of the Joseph
Rowntree Foundation for ten years.
Her expertise also includes the role
of public regulatory bodies. She has
wide experience of working within civil
society and Government. She oers an
understanding of diverse perspectives
on the work of the FRC, and this enables
her to chair the Regulatory Standards &
Codes Committee eectively.
External appointments
Dame Julia is a NED of Yorkshire Water,
Mears Group PLC, Pagoda Leasing Ltd,
Member of the Scottish Government
Council of Economic Advisers and chairs
the Governing Body of York St John
University.
P
RSC
AR
Audit & Risk
People
Conduct
Regulatory
Standards & Codes
Supervision
Bold and black
keyline
denotes
Chair of the
Committee
Full biographical
details of each
Director are
available at
www.frc.org.uk
Key to
Committees
RSC
P
AR
S
C
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CBE
Independent Non-Executive Director
Appointed 1 April 2018
Experience
Jenny brings experience of public
interest, social and consumer issues. Her
career includes board and chair roles
in the public and not-for-prot sectors.
Her public interest focus has been
brought to bear in discussions around
the future of the FRC as it transitions to
ARGA. She is a member of the Audit &
Risk Committee and chairs the People
Committee. She is also the nominated
sta representative on the Board and
holds responsibility for engagement
with the workforce, meeting regularly
with the FRC’s People Forum and
Diversity & Inclusion Committee to
bring their perspective to the Board.
External appointments
Jenny chairs GAMSTOP, the House of
St Barnabas and the governing body
of Mossbourne Parkside Academy.
She is a NED of the Reclaim Fund Ltd
and Improve Teaching, and sits on the
governing body of the Mossbourne
Federation of schools.
Independent Non-Executive Director
Appointed 21 June 2021
Experience
Ruwan is the former COO and a
Managing Partner of SoftBank
Investment Advisers, a Managing
Director and COO for Securities at
UBS Investment Bank and Partner of
Accenture. He is also a former Senior
Independent Director of ICBC Standard
Bank PLC and a Non-Executive Director
of London North West University
Health Care Trust. He brings 35 years
experience across nancial services
and 15 years in senior leadership and
director positions. He has an in-depth
knowledge and experience of operating
complex businesses on a global basis
with a focus on leveraging technology,
implementing strategy and change and
embedding and managing conduct,
culture and controls.
External appointments
None
PAR
Audit & Risk
People
Conduct
Regulatory
Standards & Codes
Supervision
Bold and black
keyline
denotes
Chair of the
Committee
Full biographical
details of each
Director are
available at
www.frc.org.uk
Key to
Committees
RSC
P
AR
S
C
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Former Chair
Appointed 7 October 2019 ,
resigned 31 May 2020
Experience
Simon brought extensive operational,
nancial and capital markets experience
developed through a series of senior
leadership roles, including most
recently as CFO of GlaxoSmithKline plc
during a period of signicant business
transformation. Previously, he spent 25
years in investment banking including
ten years as a Partner at Goldman Sachs.
Former Independent
Non-Executive Director
Appointed 2 July 2012 ,
retired 30 June 2020
Experience
Olivia brought non-executive
remuneration, risk and audit committee
experience from a variety of roles in the
private sector. She also had experience
in regulation, both nancial services
and pensions, and particular expertise
in sustainability reporting and impact
investing.
P
Members whose terms ended during the 2020/21 year and prior
to the approval of this report
RSC
Audit & Risk
People
Conduct
Regulatory
Standards & Codes
Supervision
Bold and black
keyline
denotes
Chair of the
Committee
Full biographical
details of each
Director are
available at
www.frc.org.uk
Key to
Committees
RSC
P
AR
S
C
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Board succession
Appointments to the FRC Board are made by the Secretary of State (SoS) in accordance
with the Public Appointments Process and the Governance Code for public appointments.
In accordance with the FRC Articles of Association, no Director in the three years prior to
appointment shall:
i. have been a practising auditor; or
ii. have held voting rights in an audit rm; or
iii. have been an employee of, partner of or otherwise contracted by an audit rm, a
member of the administrative, management or supervisory body of an audit rm
iv. be an oce holder of an accountancy or actuarial body.
In addition, the majority of Directors appointed shall not have been practising
accountants or actuaries; have held voting rights in an accountancy or actuarial rm; or
been employees of an accountancy or actuarial rm, members of the administrative or
management body of an accountancy or actuarial rm (iii) above in the ve years prior
to appointment.
The Board, supported by its People Committee, annually reviews the composition
of the Board and considers the balance of competencies to ensure alignment to
the FRC’s purpose and strategic priorities; the environment in which it operates; the
characteristics, perspectives, independence and diversity of Board members; how the
Board works together; and other factors relevant to its eectiveness. This review
informs any recommendations to the SoS in respect of new recruitment exercises
and reappointments.
During the year a recruitment exercise to appoint non-executive directors was
undertaken by BEIS. Ruwan Weerasekera and Hannah Nixon were appointed as NEDs
on 21 June and 24 June 2021 respectively, and an extensive induction programme was
scheduled to introduce them to the FRC, which included meeting with a wide range
of individuals from across the Executive to gain a full understanding of the roles and
responsibilities of the FRC, its standard setting and enforcement procedures and policies,
and the operations of the FRC.
In October 2020 Keith Skeoch was appointed as interim Chair pending the recruitment
of a permanent Chair. At the time of writing this report, steps to commence a
recruitment exercise were underway.
Board diversity
The Board reviewed and revised its
Diversity Policy
in February 2021. The revised policy
sets out the Board’s support for the Government’s ambitions with respect to diversity
and the Board’s commitment to work with the SoS in pursuit of the Government’s
objectives.
At the time of writing this report three of the eight Board members were women and
there was one BAME Board member. Steps to launch a campaign to recruit further NEDs
were underway.
“Appointments
to the FRC
Board are made
by the Secretary
of State.”
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Activities of the Board during the year
The Board held six scheduled meetings and one additional meeting during the year,
in addition, a number of matters were considered by correspondence. The details of
directors’ attendance at Board meetings is set out in the table below.
Eligible Attended
Keith Skeoch 6 6
Sir Jon Thompson 7 7
David Childs 7 7
John Coomber 7 7
Dame Julia Unwin 7 7
Jenny Watson 7 7
Olivia Dickson 2 2
Simon Dingemans 2 2
Board meeting agendas are carefully tailored in advance by the Chair, Chief Executive
and Executive Team to ensure an appropriate balance between strategic, operational and
standard setting as well as enforcement business. The Board agenda usually includes a
report from the Chief Executive on key matters, the Transformation Programme and, on
a quarterly basis, management information packs that provide key information on the
delivery of the strategy. The Chairs of the governance and regulatory committees update
the Board on the proceedings of their meetings, including key discussion points and any
particular areas of concern. During the year a number of matters were considered by
written resolution via email outside formal scheduled meetings. Board sub-groups were
convened from time to time as necessary to full its responsibilities. The Board received
meeting papers via a portal that enhances the security of condential and sensitive
information. All meeting papers were presented in a template that enabled the Board to
focus on points of issue and understand what outreach and input had been sought in
developing the recommendations.
The NEDs assess, challenge and decide on the Executive Directors’ proposals and
matters for decision to ensure they are aligned with the FRC’s strategy and purpose.
The Board’s responsibilities include, but are not limited to:
• Setting FRC strategy and monitoring progress against the agreed strategy (details
can be found in the Strategic Report on pages 7-46).
• Overseeing the implementation of a robust controls framework to allow eective
management of risk. Most of this work is supported by the Audit and Risk Committee
and input from the Government Internal Audit Agency (GIAA) (see pages 82-86). The
Board has reviewed the eectiveness of the risk management and internal control
systems during the year. Public Sector Internal Audit Standards require the Head
of Internal Audit (HIA) to give the Accounting Ocer an opinion on the overall
adequacy and eectiveness of the organisation’s framework of governance, risk
management and control, timed to support the Governance Statement.
• Issuing and maintenance of Codes and/or Standards for corporate governance,
stewardship, corporate reporting, accounting, auditing, assurance services and
actuarial work.
“The Board held
six scheduled
meetings and
one additional
meeting during
the year.”
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• Advising the SoS on the composition of the Board and the remuneration of Board
members.
• Composition of, and succession arrangements for, Board Committees, the Advisory
Panel and Senior Advisers.
• Ensuring workplace policies and practices are in place that align with the FRC’s
culture and values and operate in support of its strategy.
• Exercising the functions of the Secretary of State under Part 42 of the Companies Act
2006 and as Competent Authority under the Statutory Audit and Third Country Audit
Regulations 2016.
The Board discharged some of its responsibilities through its governance and regulatory
committees; more detail on this and matters reserved to the Board can be found in the
FRC’s
Governance Handbook
.
As the designated NED for engagement with the workforce, Jenny Watson attends
meetings of the People’s Forum and Diversity & Inclusion Committee (sta consultative
bodies) on a regular basis. Jenny reports to the People Committee, and Board where
appropriate, following attendance at those meetings. Actions arising from her
attendance are recorded and actioned appropriately. More detail on how the FRC
engages with its key sta and other stakeholders is set out on pages 26-28.
The Board has access to an appropriately qualied and experienced Company Secretary,
who provides independent advice to the Board on governance matters. Her appointment
or removal is decided by the Board.
More details of the Board’s activities during the year can be found in the minutes of
Board meetings at
www.frc.org.uk/board minutes
.
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How the Board discharged its responsibilities
The table below summarises matters considered by the Board during the year.
Key to
Committees /
Councils
(ARC)
Audit & Risk
Committee
(N)
Nominations
(R)
Remuneration
(CC)
Conduct
(CSC)
Codes & Standards
(RSC)
Regulatory
Standards & Codes
(AAC)
Audit & Assurance
Council
(CRC)
Corporate
Reporting Council
(AC)
Actuarial Council
(AQRC)
Audit Quality
Review Committee
(EC)
Enforcement
Committee
(CRRC)
Corporate
Reporting Review
Committee
(PC)
People Committee
Considered and approved the issue of several new
and revised Standards and adopted a number of
International Standards; this included:
- Revisions to ISRE 2410 (UK) Review of Interim
Information by the independent auditor of the
entity (AAC)
- Amendments to FRS 101 (CRC)
- Amendments to FRS 102 and FRS 105 – Covid-19
related rent concessions (CRC)
- Amendments to FRS 102 – Interest Rate
- Approved the issue of a consultation on revisions
to the UK’s Quality Management Standards (AAC)
- Approved a revised Policy for the Development
- Agreed to the development of a process for faster
revisions to Standards in the case of urgent and/or
non-controversial revisions
- Adoption of the International Standard on
Assurance Engagements (ISAE) 3000 (revised) (AAC)
- The Actuarial Statement of Recommended Practice
1 and Feedback Statement (AC)
- Revisions to Technical Actuarial Standard 400 –
Funeral Plans (AC)
- Revisions to ISA (UK) 140 (AAC)
The revisions aligned ISRE 2410
(UK), which covers reviews of
interim nancial information
with the more stringent going
concern requirements in our
recently revised ISA (UK) 570
Going Concern
These amendments responded
to the Covid-19 pandemic to
address concerns and improve
the consistency of reporting for
users of nancial statements
The Board approved the
revised quality control and
quality management auditing
standards in June 2020 –
the UK is one of the rst
jurisdictions to do so. This
maximises the time available
to audit rms to enhance their
quality management approach.
The process was agreed by
the RSC and eective from
1 May 2021
Matters considered and Progress
decision / outcome update
Area of focus:
Audit, accounting and actuarial standard setting
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Matters considered and Progress
decision / outcome update
Area of focus:
Corporate governance, Stewardship and narrative reporting
Approved publication of the UK Stewardship Code
2020 (RSC)
Considered and supported publication of a Climate
Change thematic report (RSC)
Agreed the approach to climate-related
reporting, expressly supporting reporting against
the Task Force on Climate-related disclosures
recommendations and the Sustainability Accounting
Standards Board metrics (RSC)
Considered and provided input to a thought
leadership paper proposing a principles-based
framework for corporate reporting (RSC)
The revised Code focuses much
more on delivering stewardship
outcomes than on the policies
and processes a signatory has.
This has satised the challenge
made by Sir John Kingman
in his review, and also has
attracted signicant interest
from the UK and internationally.
The team are already seeing
high levels of interest from
applicants.
This is a major contribution
toward improving the quality
of climate reporting in the UK,
to better meet stakeholder
needs and also to show UK
leadership in this space in the
run up to COP26.
This means UK companies are
encouraged to report using
two frameworks – this provides
consistency and comparability,
which stakeholders want, and
SASB provides helpful sectoral
application material to support
the principles-based approach
in TCFD. This will support
high-quality reporting pending
progress on international
standards.
Key to
Committees /
Councils
(ARC)
Audit & Risk
Committee
(N)
Nominations
(R)
Remuneration
(CC)
Conduct
(CSC)
Codes & Standards
(RSC)
Regulatory
Standards & Codes
(AAC)
Audit & Assurance
Council
(CRC)
Corporate
Reporting Council
(AC)
Actuarial Council
(AQRC)
Audit Quality
Review Committee
(EC)
Enforcement
Committee
(CRRC)
Corporate
Reporting Review
Committee
(PC)
People Committee
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Matters considered and Progress
decision / outcome update
Area of focus:
Supervision
Considered and approved a number of publications
including the Developments in Audit Report, the
Annual Reports on the AQR inspection cycle, the
annual Key Facts and Trends report and the Annual
Review of Corporate Reporting; in addition, the
Board approved the FRC’s publication policy for
Audit Firm Supervision (AFS) ndings (AQRC, CRRC)
Considered and approved a series of
recommendations relating to operational
separation, including the underlying principles,
the success criteria and the proposed timetable
for implementation (CC)
Noted and agreed the conclusion of the Conduct
Committee that the FRC had eectively fullled its
assigned responsibilities as Competent Authority
for statutory audit in the UK (CC)
Approved a Revocation Order to eect the
surrender of the Institute of Chartered Accountants
of Scotland’s status as an RSB for local audit in
England (CC)
Received reports from the Conduct Committee
Chairman on the fullment of the FRC’s monitoring
and oversight responsibilities (CC)
Agreed a number of amendments to Directions,
procedures and Memorandums of Understanding
(MoUs) consequential to UK’s exit from the EU (CC)
CRR published an additional
thematic in July 2020 on the
nancial reporting eects of
Covid-19 to guide companies
preparing their annual
and interim accounts. This
complemented other FRC
guidance on Covid-19 issues
produced throughout the year,
many of which were created
in collaboration with other
regulators.
There was strong engagement
on the development of the
principles that were
published
in February 2021.
The Board recognised
new risks to the eective
delivery of our Competent
Authority responsibilities as
a result EU Exit, the Covid-19
pandemic, ageing registration
infrastructure and the planned
transformation to ARGA. These
risks and their mitigations were
kept under close review.
All necessary amendments
were made in time for UK’s
exit from the EU.
Key to
Committees /
Councils
(ARC)
Audit & Risk
Committee
(N)
Nominations
(R)
Remuneration
(CC)
Conduct
(CSC)
Codes & Standards
(RSC)
Regulatory
Standards & Codes
(AAC)
Audit & Assurance
Council
(CRC)
Corporate
Reporting Council
(AC)
Actuarial Council
(AQRC)
Audit Quality
Review Committee
(EC)
Enforcement
Committee
(CRRC)
Corporate
Reporting Review
Committee
(PC)
People Committee
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Matters considered and Progress
decision / outcome update
Matters considered and Progress
decision / outcome update
Area of focus:
Enforcement
Area of focus:
Strategy
Considered quarterly reports on the activities of
the Enforcement Division, including the status
of investigations, recruitment to the Division,
actions to rene the investigation process and the
outcome of risk and horizon scanning activities
(CC)
Approved publication of the
Annual Enforcement
Review 2020
Approved the draft FRC Strategy, Plan and
Budget 2021/22 for consultation Reviewed
and considered responses to the consultation
including suggestions for future years
Approved the nal 2021/22 Strategy, Plan and
Budget and the Feedback Statement for issue
Received quarterly management information
packs that included information on progress
against budget and strategy, including KPIs
The Conduct Committee
and Board were provided
with data and analysis of
investigations’ progression
against established KPIs and
milestones. This enhanced
data provides a clearer picture
of where and why delays
occur and is informing how
we approach and pace our
investigations.
A new approach to reporting
management information
meant the Board could monitor
progress against strategy
more closely and keep abreast
of operational and people
matters.
Key to
Committees /
Councils
(ARC)
Audit & Risk
Committee
(N)
Nominations
(R)
Remuneration
(CC)
Conduct
(CSC)
Codes & Standards
(RSC)
Regulatory
Standards & Codes
(AAC)
Audit & Assurance
Council
(CRC)
Corporate
Reporting Council
(AC)
Actuarial Council
(AQRC)
Audit Quality
Review Committee
(EC)
Enforcement
Committee
(CRRC)
Corporate
Reporting Review
Committee
(PC)
People Committee
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Matters considered and Progress
decision / outcome update
Matters considered and Progress
decision / outcome update
Area of focus:
The Transformation Programme
Area of focus:
Sta matters and culture
The Board considered routine reports on the
programme of work incorporating the Kingman
Review, the CMA’s market study and the Brydon
Review together with organisational changes
associated with establishing ARGA.
The reports sought input from the Board on
a range of policy position papers on subjects
including:
- A possible competition duty
- Minimum standards for Audit Committees
- Auditor appointments and resignations
- Control frameworks
- Operational separation
- Corporate failure
- The denition of a Public Interest Entity
- Internal controls
The Board received a report on the ndings of the
2020 people survey and welcomed the agreed actions
identied in response to the ndings; the Board
also noted a high-level summary of the 2021 people
survey results at its March 2021 meeting (PC)
Agreed to combine the Code of Conduct for
employees, NEDS and members of the Governance
Structure, and agreed an amendment to the Code in
relation to non-executive appointments (PC)
Received routine reports from the non-executive
member responsible for workforce engagement (PC)
Received routine updates on working at home
arrangements and sta morale during the Covid-19
pandemic (PC)
Approved proposed 2019/20 pay awards for eligible
members of the Executive Committee (PC)
Considered and endorsed proposed changes to the
Executive Committee structure and senior leadership
and was kept updated on associated recruitment
processes (PC)
The White Paper
Restoring
trust in audit and corporate
governance
was issued in
March 2021.
Via the CEO report the Board
received regular updates on
progress in implementing
the agreed actions and was
pleased to note a signicant
improvement in the 2021
survey results.
During the year Alex Kuczynski
was appointed as Executive
Director – Corporate Services
and General Counsel and Mark
Babington was appointed as
Executive Director – Regulatory
Standards and Codes.
Key to
Committees /
Councils
(ARC)
Audit & Risk
Committee
(N)
Nominations
(R)
Remuneration
(CC)
Conduct
(CSC)
Codes & Standards
(RSC)
Regulatory
Standards & Codes
(AAC)
Audit & Assurance
Council
(CRC)
Corporate
Reporting Council
(AC)
Actuarial Council
(AQRC)
Audit Quality
Review Committee
(EC)
Enforcement
Committee
(CRRC)
Corporate
Reporting Review
Committee
(PC)
People Committee
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Matters considered and Progress
decision / outcome update
Area of focus:
Governance
Considered a series of recommendations relating
to internal governance arrangements. The Board
agreed a phased approach to implementation of
the new governance structure and agreed
a number of consequential:
- amendments to Committee Terms of Reference
- amendments to Operating and Enforcement
Procedures
- Committee appointments and reappointments
Agreed the objectives, roles and responsibilities
for the Chair and CEO
Considered and supported the submission
of recommendations to the Secretary of State
in relation to future non-executive and Chair
recruitment following consideration of an analysis
of the skills, experiences and backgrounds of
members of the Board and the skills that would
be needed once ARGA was established and during
the transformation period
Considered and agreed the FRC’s approach to
reporting on Corporate Governance
Considered and approved a revised Board
Diversity Policy
A phased approach
to implementation of
the new governance
structure commenced on 1
September 2020 with the
establishment of the People
Committee, replacing the
former Nominations and
Remuneration Committees.
Over the year a number of
steps were taken culminating
in the establishment of a third
regulatory committee – the
Supervision Committee – on 1
April 2021.
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Matters considered and Progress
decision / outcome update
Area of focus:
Audit and Risk
Noted the Audit & Risk Committee’s assessment
of the eectiveness of the internal audit function
provided by the Government Internal Audit
Agency and approved the reappointment of
the GIAA as the FRC’s internal auditors (ARC)
Noted the Audit & Risk Committee’s
assessment of the eectiveness, independence
and qualication of the External Auditor,
including the arrangements in place to ensure
independence given the FRC’s status as
Independent Supervisor of the Comptroller
General. On the basis of the assessment agreed
to recommend to the Company at its AGM the
reappointment of the NAO as the FRC’s
External Auditor (ARC)
Noted the Audit & Risk Committee’s
assessment that the FRC’s internal control
and risk management frameworks are
adequate (ARC)
Considered the risk management extract for
inclusion in the FRC’s Annual Report & Accounts
for the year ended 31 March 2021 (ARC)
Considered reports on the Audit & Risk
Committee’s work in respect of risk management,
including the development of the risk
management framework and summaries
of changes to Principal Risks (ARC)
Received summaries of Internal Audit reports
from the Audit & Risk Committee Chair (ARC)
The Board commended
the Executive on the work
undertaken during the year
and the progress that had been
made in strengthening the
FRC’s internal control and risk
management framework.
The Board agreed changes
to the Principal Risk Register,
including the introduction of
two new principal risks and
the de-escalation of three
principal risks to Divisional
Level.
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Matters considered and Progress
decision / outcome update
Matters considered and Progress
decision / outcome update
Area of focus:
Other matters
Area of focus:
UKEB
Considered a revised Stakeholder
Engagement and Corporate Aairs
strategy and received quarterly
updates on implementation of that
strategy and key communications-
related matters
Considered and approved a Modern
Slavery Statement
Considered the ndings of YouGov
research into Audit Committee Chairs’
views on, and the approach to, audit
quality
Received updates on the establishment of the
UKEB and the development of an MoU
Considered and supported a proposed approach
to the fullment of the FRC’s responsibility for
the oversight of due process by the UKEB
Approved amendments to the Board Schedule
of Matters Reserved and the People Committee
Terms of Reference relating to the establishment
of the UKEB and the FRC’s oversight
responsibilities
Considered and endorsed revised Articles of
Association for the UK Accounting Standards
Endorsement Board (FRC subsidiary company)
The FRC does not
condone modern slavery
and publication of this
statement reinforces the
Board’s commitment to
section 54 of the Modern
Slavery Act 2015
The UKEB held its rst
Board meeting
on 26
March 2021.
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Board eectiveness
In accordance with the UK Corporate Governance Code, Board eectiveness is usually
reviewed annually, with an externally led review every three years. The last externally
facilitated review was in 2015/16. The Independent Review of the Financial Reporting
Council (the Kingman Review), which was issued in December 2018, recommended
changes in the composition of the Board and signicant simplication of the governance
architecture. In response to the Kingman Review, and an internal review of governance
arrangements, steps towards a new streamlined governance structure commenced in
April 2020. The new structure, anticipated to be fully established in Autumn 2021 once
the NED recruitment exercise has concluded, is designed to enhance the eectiveness,
speed and responsiveness of the organisation, while establishing clearer lines of
accountability and empowering the Executive.
As stated earlier, a formal eectiveness review of the Board has been deferred until
the recruitment of NEDs and a permanent Chair is concluded by BEIS. However, during
the year, the Board has reected on its governance arrangements and taken steps to
ensure that, as far as is possible in the circumstances, the highest standards of corporate
governance are observed. The circumstances, including the appointment of a former
NED as interim Chair, has resulted in new ways of working and has enabled relationships
between NEDs to develop and embedded a culture of openness. The Board is operating
eectively and has adapted to the challenges posed by the reduced membership,
continuing to ensure its responsibilities are met.
An internal review of the eectiveness of the new governance structure will be
undertaken in late 2021. A formal external review of the eectiveness of the Board
will be undertaken in early 2022, at which time we expect to have a full Board.
Regulatory Committee reports
To ensure independence, no member can sit on more than one regulatory
committee. However, to facilitate eective, informed and evidenced decision-
making, the three Committees consider and respond to requests from one another,
taking advice from Senior Advisers and Advisory Panel members as appropriate.
“An internal
review of the
eectiveness
of the new
governance
structure will
be undertaken
in late 2021.”
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Annual Report and Financial Statements 2020/21
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15.
Conduct Committee Report
Our focus during 2020/21
• Continuing to act in the public interest to ensure that auditors, actuaries and
accountants are held to account for the quality of their work
• Overseeing a robust delivery of our delegated supervisory functions throughout the
Covid-19 pandemic
• Monitoring the quality of corporate reporting and audit work in the UK and
publishing clear and informative messages to the public about the ndings of the
FRC’s reviews and investigations
Role of the Committee
The Conduct Committee oversees the delivery of the FRC’s supervisory, monitoring
and enforcement work (and supervisory work up to 31 March 2021), receiving regular
reports from Executive teams responsible for the Supervision, Corporate Services and
Enforcement Divisions.
Up to 31 March 2021, the Conduct Committee had specied delegated functions under
Companies Act 2006 legislation in relation to corporate reporting review. An order was
made on 15 April 2021 to name the FRC, rather than the Conduct Committee, as the
authorised person to conduct these functions. The Supervision Committee will now
exercise these functions on the Board’s behalf.
Membership and attendance
The Committee is chaired by Board member David Childs. The Conduct Committee met
11 times during 2020/21 and meetings were well attended by members. Helen Jones
retired on 31 December 2020 after nearly six years on the Committee. The Committee
now has seven members, comprising three lawyers, one former actuary and three former
audit partners. Members’ biographies can be found on the FRC website.
Eligible Attended
David Childs 11 11
Georey Green 11 10
Philippa Hardwick 11 11
Helen Jones 8 8
Andrew Johnston 11 11
Anne Whitaker 11 10
John Hitchins 11 11
Sean Collins 11 11
David Childs
Chair of the
Conduct
Committee and
Independent
Non-Executive
Director
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Activities during 2020/21
In addition to the matters reported to the Board on pages 67-74, during 2020/21 the
Committee considered, decided and/or approved the following matters:
Enforcement procedures
• The Committee took decisions required under the FRC’s disciplinary schemes and
Audit Enforcement Procedure. This, included opening 16 investigations, amending
the scope of 1 investigation and referring 3 cases for constructive engagement. No
preliminary enquiries were commenced and no cases were referred to the relevant
RSB for investigation.
• The Committee took decisions regarding the publication of announcements relating
to enforcement investigations and proceedings.
• It approved some minor amendments to the Accountancy and Actuarial Schemes
and AEP’s publication policies in relation to the presumption of anonymity for some
third parties in enforcement announcements and claried the approach to be taken
regarding the notication and anonymisation of third parties in the announcements
of enforcement outcomes and Tribunal ndings.
• Following a public consultation, the Committee approved amendments to the
corporate reporting operating procedures to reect the new governance structure.
• The Committee considered whether it was in the public interest to continue to
provide the outcomes of historic enforcement cases beyond the default retention
periods set for each category of outcome on a case by case basis.
Approval of budgets
The Committee approved the budgets for investigations, ongoing preliminary enquiries
and Tribunal proceedings.
Covid-19 risks:
The Committee received regular updates from the Enforcement and Supervision
Divisions on the risks to the FRC and its stakeholders associated with Covid-19 and how
the Executive were managing those risks through: the adaptation of work processes;
additional targeted reviews; the publication of new guidance documents; and regular
correspondence and dialogue with stakeholders, the Government and other regulatory
bodies.
Internal audit reports
The Committee received biannual reports on how the FRC had discharged its
responsibilities as the Competent Authority for Audit in the UK.
Oversight of RSBs and RQBs
The Committee received reports and updates relating to the Executive’s monitoring of
the RSBs’ and RQBs’ compliance with their delegated requirements and arrangements.
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TCA Directions and Register Procedures
The Committee reviewed changes to the Directions and Register Procedures for the
regulation of Third Country Auditors following the end of the UK’s exit from the EU
Implementation period.
Oversight of case examinations and enquiries
The Committee oversaw the work of the Case Examinations and Enquiries team,
receiving quarterly updates on the team’s assessment and progression of cases. This
included an update on the Executive’s work in developing the approach and criteria for
constructive engagement.
Oversight of FRC’s central complaints
The Committee oversaw the work of the FRC’s central complaints function and received
updates on GDPR and FOIA requests.
CRR and AQR publications
The Committee approved thematic reviews from CRR and AQR teams for publication.
The Committee also reviewed reports setting out the annual AQR results for PIE entities,
major local audits and inspections carried out on behalf of the Crown Dependencies.
Review of other publications
The Committee reviewed other publications throughout the year including the
thematic report on Climate Change Reporting, the
Annual Enforcement Review 2020
,
the
Corporate Reporting Annual Review, Developments in Audit
and
Key Facts and
Trends in the Accountancy Profession.
The Committee’s terms of reference are available on
www.frc.org.uk
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16.
Regulatory Standards & Codes
Our focus during 2020/21
• Monitoring reporting against the UK Corporate Governance Code
• Early ndings of the review of Stewardship Code reporting and progress made
regarding signatory assessment framework
• Standard setting activities for actuarial, audit and assurance and corporate reporting
Role of the Committee
Since the implementation of the new governance structure, the former Codes &
Standards Committee was renamed the Regulatory Standards & Codes Committee (the
Committee) with eect from 1 January 2021. The Committee has an expanded remit to
include responsibility for:
• Approving and overseeing on behalf of the Board high-quality, eective and
proportionate standards, guidance, Statements of Recommended Practice (SORPs),
practice notes and codes in relation to corporate governance, stewardship, audit and
assurance, actuarial, and corporate reporting work;
• Approving policies and procedures, commissioning internal reviews and issue
of consultations and recommending nal Standards and Codes to the Board for
approval;
• Approving minor, non-contentious amendments to regulatory Standards and Codes
(barring accounting standards);
• Advising the Board on the FRC’s oversight of the UKEB due process; and
• Approving the issue and maintenance of FRC taxonomies, including for consultation.
Membership and attendance
During the year, the members of the Committee, all of whom have extensive knowledge
of, or skills in, regulation, standards and codes that fall within FRC’s remit, were Julia
Unwin (Chair), John Coomber, Olivia Dickson (retired on 30 June 2020), Sue Harris
(retired on 31 December 2020), Liz Murrall (retired on 31 December 2020) and Keith
Skeoch. The Committee is also supported by Senior Advisers Rosemary Beaver, Paul Cox
and Richard Lawrence, the biographies of whom can be found on the FRC website. The
meetings are also attended by observers from BEIS and the FCA.
Dame Julia Unwin
CBE
Chair of Regula-
tory Standards &
Codes Committee
and Independent
Non-Executive
Director
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Annual Report and Financial Statements 2020/21
80
Eligible Attended
Julia Unwin 4 4
John Coomber 4 4
Olivia Dickson 0 0
Sue Harris 2 1
Liz Murrall 2 2
Keith Skeoch 2 2
Activities during 2020/21
The Committee met four times and considered a number of matters by email outside
formal meetings. All meetings were held virtually, as a result of the global COVID-19
pandemic.
Key areas of focus for the Committee in 2020/21 were the following:
Corporate Governance and stewardship
The Committee agreed the continuation of work plan and received regular updates on
the progress made on the Stewardship Code signatory assessment framework and the
activities undertaken in relation to the UK Corporate Governance Code.
Accounting and reporting
The Committee considered the proposed amendments to FRS 101 Reduced Disclosure
Framework and discussed the approach to Periodic Review 2022.
Audit and assurance
The Committee considered the proposed revisions to ISRE 2410
Review of Interim
Financial Information Performed by the Independent Auditor of the Entity
, Practice Note
10
Audit of Financial Statements of Public Sector Bodies in the UK
, ISQM (UK) 1 and ISA
(UK) 220 to reect the requirements and guidance in the new standards, ISQM, ISQM 2,
ISA 220 and other ISAs (UK) to reect the changes made to the corresponding standards
issued by the IAASB. It also approved the nal amendments to Practice Note 14
The
Audit of Housing Associations in the UK
and the Feedback Statement.
Competition policy
The Committee received an update on the work undertaken on the audit competition
policy and plans for 2021/22.
FRC taxonomies
The Committee approved the creation of a UK national extension for the European
Single Electronic Format (ESEF) taxonomy and the revised draft FRC Taxonomies
Amendments 2021 for issue. They also discussed the work plan for the FRC
Taxonomies 2022 version.
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Actuarial policy work
The Committee agreed in principle the approach to developing an actuarial monitoring
framework with a view to seeking to obtain appropriate legal powers for ARGA.
Discussed the scope of compliance of Technical Actuarial Standards.
FRC Lab
The Committee received an update on the Lab’s planned activities.
Advisory Councils and task force/sub-groups
The Committee agreed to support the continuation of task forces and sub-groups
created by advisory councils and approved a number of extensions of terms to the
advisory councils. The advisory councils were disbanded on 31 December 2020.
Transformation
The Committee received an update on the FRC’s Transformation Programme.
Revisions to the governance structure
The Committee received an update on the changes to the FRC’s new governance
structure and proposed arrangements for the enhanced responsibilities of the
Committee.
The Committee’s terms of reference and the minutes of the meetings from 1 January
2021 are available on
www.frc.org.uk
17.
Supervision Committee
The Supervision Committee was established on 1 April 2021.
Role of the Committee
The Committee provides strategic input and constructive challenge to the FRC’s
supervision and monitoring activities, identifying key areas of risk and monitoring
progress against the Supervision Division’s objectives and operational plans.
From 1 April 2021, the Committee was responsible for overseeing the FRC’s
delegated statutory supervisory and oversight functions and its non-statutory
monitoring work, with the aim of serving the public interest by promoting high
professional standards in accounting, audit, actuarial work and corporate reporting.
The Committee exercises powers delegated to the FRC by the SoS in relation to
corporate reporting review.
The activities of the Supervision Committee were undertaken by the Conduct
Committee up to 31 March 2021.
David Childs
Chair of
Supervision
Committee and
Independent
Non-Executive
Director
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18.
Audit & Risk Committee Report
Our focus during 2020/21
• Reviewing nancial performance including progress against agreed budget and
reforecasting exercise
• Fullling the oversight role of monitoring the integrity of the Annual Report and
Financial Statements
• Reviewing and discussing reports presented by internal and external auditors
• Challenging the risk management processes and internal controls in light of the
Transformation programme
Role of the Committee
As part of the Board’s decision relating to the new governance structure, the former
Audit Committee was renamed the Audit & Risk Committee (the Committee) with eect
from 1 January 2021. The Committee has an increased role regarding risk management
and internal controls. The terms of reference were revised to reect the increased
responsibilities and aligned with the terms of reference for public body audit & risk
committees. The Committee is committed to supporting and advising the Accounting
Ocer (the Chief Executive) and the Board by providing oversight of the company’s
nancial reporting process and use of public funds, corporate governance, the audit
process, the system of internal controls, including business continuity and information
technology, the identication and management of signicant risks, and its compliance
with laws and regulations. The terms of reference of the Committee are available on
www.frc.org.uk
Membership and attendance
Membership of the Committee changed during the year following departures from the
Board and a review of the skills represented on the Committee.
Following the departure of Nick Land, John Coomber was appointed as Chair on 1 April
2020. To ensure appropriate skills and experience Olivia Dickson was appointed from
1 April 2020 until her appointment as a Board member ended on 30 June and Jenny
Watson was appointed on 1 July 2020.
To ensure recent and relevant nancial experience the Board co-opted Michael Hearty
as a member of the Committee on 1 September 2020. Michael has an extensive public
sector nance background and brings signicant experience in the development and
application of governance, risk and assurance arrangements in a range of organisations,
including those undergoing transformation. Michael’s biography can be found on the
FRC
website.
With these appointments, the Board was satised that the combined knowledge and
nancial experience of the Committee members as of 31 March 2021 ensured that it
could full its responsibilities eectively.
John Coomber
Chair of Audit &
Risk Committee
and Independent
Non-Executive
Director
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The Committee met six times during the year and considered a number of matters
by email outside formal meetings. All meetings were held virtually, as a result of the
global COVID-19 pandemic. In addition to the members, the Chair, the external auditor
(NAO) and the internal auditor (GIAA) were invited to each meeting together with the
Chief Executive, Finance Director, the General Counsel and Company Secretary. The
Committee met the external auditor in private once during the year and the Committee
Chair met privately with both the internal and external auditor outside the formal
committee process during the year. To protect the objectivity and independence of the
external auditor, it is the FRC’s policy that they are not contracted to carry out any non-
audit services. The eectiveness of the external auditor was assessed by the Committee
based on its own interaction with the auditor and input from the FRC Executive.
Activities during 2020/21
Key areas of focus for the Committee in 2020/21 included the following:
Eligible Attended
John Coomber 6 6
Olivia Dickson 2 2
Michael Hearty 4 4
Dame Julia Unwin 6 6
Jenny Watson 4 4
Area Action taken /
of focus Consideration progress update
Financial
and narrative
reporting
In relation to the Annual Report and
Financial Statements for the year
ended 31 March 2020:
• monitored and reviewed the
integrity of the nancial statements
including the quality and
acceptability of accounting policies
and practices
• monitored material areas in which
signicant judgements had been
applied
• assessed whether the Annual Report
as a whole, is fair, balanced and
understandable and advised the
Board accordingly
• considered the approach to be
taken to the Annual Report and
Financial Statements for the year
ended 31 March 2020, the draft risk
statement and agreed the approach
to viability reporting
Additional narrative, relating
to the FRC’s departure
from the principles and
provisions of the Corporate
Governance Code including
not being able to appoint
its Chair, Deputy Chair and
NEDs, was considered and
approved
The Committee supported
the view that a viability
statement would not be
included. The Committee
concluded that the nancial
statements should continue
to be prepared on the
going concern basis of
accounting, given BEIS’s
Letter of Comfort
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Area Action taken /
of focus Consideration progress update
Financial
and narrative
reporting
External audit
Internal audit
Discussed and approve the FRC
accounting policies for the Financial
Statements for the year ended 31
March 2021
Approved for recommendation to the
Board the NAO’s Audit Engagement
Letter and fees for the year ended 31
March 2021
Assessed the eectiveness of
external audit and recommended the
reappointment of NAO as the FRC’s
statutory auditors at the 2020 AGM of
the FRC
Considered GIAA’s annual report
and opinion. Considered reports on
progress of internal audits undertaken
in accordance with the 2020/21
internal audit plan
Considered GIAA’s review report on
the FRC’s response to Covid-19
Supported the draft Internal Audit
Plan for 2021/22 which was open to
exibility and adaptability to reect
any change to risks and priorities
Assessed the eectiveness of internal
audit and recommended to the Board
the reappointment of GIAA for the
next reporting period
Policies were revised
in accordance with the
Committee’s decisions.
This was approved by the
Board
The Company appointed
NAO as statutory auditors
to hold oce until the
conclusion of the next AGM
The executive responded
to the recommendations
identied in the various
internal audit reports.
The FRC has been eective
in its response to Covid-19
through its operational arm,
recognising risks on levy,
testing of IT, changes in
governance including risk
analysis and focusing on
wellbeing
The Committee requested
a longer-term internal
audit plan in light of FRC’s
transformation into ARGA
The Board approved the
reappointment of GIAA
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Area Action taken /
of focus Consideration progress update
Risk
management
and internal
control
Discussed in detail:
• progress made to embed risk
• risk management framework
• risk appetite statement
• divisional risk registers
Discussed changes to the Principal
Risks
Discussed FRC’s internal nancial
controls and considered the measures
in place to address the risk of fraud
The Committee approved
the proposed risk
appetite statement for
recommendation to the
Board noting that further
improvements would be
made as the work on the
framework and mitigations
develops. The Board
considered the suite of
documents
Work on embedding the
FRC’s Risk Management
Framework and assurance
road map included
regular meetings with risk
champions, risk deep dives
and training programmes
In March 2021, the
Committee advised
the Board regarding
the appropriateness of
organisation’s risk strategy
and risk appetite
With the launch of the
new risk management
Framework, new risks
were identied and three
Principal Risks were
de-escalated
The Committee reported its
conclusions to the Board,
which included sucient
controls were in place and
new approaches were being
pursued to ensure controls
are robust for a growing
organisation
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Area Action taken /
of focus Consideration progress update
Other matters
Considered Committee’s revised
Terms of Reference and Forward Plan
Approved the FRC’s IT Strategy
2020–2022
Considered routine reports from the
Head of IT on the activities of the
department, including improvement
to the FRC’s cyber defences and
resilience
Discussed various legal and
compliance matters including:
• the Compliance Report 2019–20,
which included an overview of
the regulatory responsibilities and
compliance
• annual Information Report on key
information risk areas and strategy
and an update on early voluntary
adoption of FOIA
• revisions to FRC’s internal and
external Whistleblowing Policies,
which reected the Modern Slavery
Act statement
On 1 January 2021,
the Committee was
renamed the Audit & Risk
Committee with enhanced
responsibilities in respect of
risk and internal control
The strategy sets out the
mechanism to support
eective IT service as
the FRC transitions to
a powerful regulatory
authority The Committee
supported the development
of KPIs for the department
Cyber security training
programmes for NEDs
were rolled out
Actions were taken to focus
on implementation of the
Transformation Programme
and the FRC remain
compliant post UK’s exit
from the EU.
A signicant amount of
work was undertaken to
embed GDPR compliance
mechanisms in the
organisation. There have
been no signicant data
losses.
All notied information
incidents were assessed
and categorised as low risk
following investigation
Whistleblowing Policies
were updated and
published on the intranet
and the FRC website
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Internal Audit Opinion (2020-21)
A key source of independent assurance for FRC is the internal audit function provided
by the Government Internal Audit Agency (GIAA), which complies with the Public
Sector Internal Audit Standards. The annual internal audit programme is closely linked
to its key risks. Arrangements are in place to ensure that the Accounting Ocer
is made aware of any signicant issues which indicate that key risks are not being
eectively managed.
The Head of Internal Audit (HIA) provided an improved opinion on governance, risk
management and control for 2020/21, which he assessed as ‘Moderate’. The opinion
takes into consideration the context in which the department had to operate over
the year, with the pandemic. The HIA recognised that the FRC revised its guidance
for external auditors on minimum standards required, and also re-evaluated how it
conducted its own regulatory audits. For its own continued operation, FRC responded
well to the move to home-working. He also acknowledged the FRC’s strength in
complying with managing public money principles, which is supported by the
NAO’s audit; building strong foundations surrounding risk management; and strong
governance and control in its regulatory role, for its own audits on external audit rms.
Surrounding its future focus, the HIA noted that the FRC is working eectively with
BEIS on its transformation to become ARGA. Whilst progress has been hindered by
delays in securing legislative time (which is outside of FRC’s control, predominantly
due to EU Exit and the Covid-19 pandemic), he is satised that steps have been
taken to examine and assess risks. The HIA identied that for work for improving
governance, risk management and internal control surrounds building an IT strategy
that aligns with the development of ARGA; embedding its strategy on proving GDPR
compliance; and strengthening risk management through developing a 3 lines of
defence model. He is satised that steps are in place to address these.
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19.
People Committee Report
Our focus during 2020/21
• Appointments to the new governance structure
• Ensuring the wellbeing of the workforce during the Covid-19 pandemic
• Conicts of interest
• Reviewing wider NED and workforce policies and talent management
Role of the Committee
The People Committee was established in September 2020 to provide the FRC Executive
with challenge, constructive dialogue and strategic direction on issues relating to the
appointment and recruitment, remuneration, talent management and welfare of FRC
sta and non-executive members and to take high-level decisions as necessary. The
terms of reference of the Committee can be found on the FRC
website.
The Committee
replaced the former Nomination and Remuneration Committees.
Membership and attendance
Prior to the establishment of the People Committee, the members of the Nominations
Committee were Simon Dingemans (Chair until 31 May 2020), David Childs and
Jenny Watson and the members of the Remuneration Committee were Jenny Watson
(Chair) and John Coomber. The members of the People Committee with eect from 1
September 2020 were Jenny Watson (Chair), David Childs and Julia Unwin. The Board
appointed Keith Skeoch as a member from 29 October 2020.
All members of the Committee are independent NEDs of the FRC Board, and their
biographies can be found on pages 59-63. The Chair of the People Committee is the
NED with responsibility for workforce engagement. In a dual role capacity she attends
meetings of the People Forum and attends sta meetings from time to time to ensure
lines of communication between the sta and the Board.
The Committee met six times during the year and considered a number of matters by
email outside formal meetings. All meetings were held virtually as a result of the global
Covid-19 pandemic. In addition to the Chair and the members, the meetings are also
attended by the Chief Executive, Company Secretary, Executive Director of Corporate
Services & General Counsel and the Head of Human Resources.
Eligible Attended
Jenny Watson 6 6
David Childs 5 5
John Coomber (to 31 August 2020) 1 1
Simon Dingemans (to 31 May 2020) 1 1
Keith Skeoch 4 3
Julia Unwin 4 4
Jenny Watson
CBE
Chair of People
Committee and
Independent
Non-Executive
Director
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Activities during 2020/21
Key areas of focus for the Committee in 2020/21 included the following:
Aera of focus Action taken Progress update
Board
composition
and size
Appointments
and
reappointment
to the
governance
structure
The Committee reviewed the skills,
experiences and backgrounds of
the existing NEDs and the skills and
experiences that would be needed on
the Board in coming years, including
during the transformation period.
Having regard to this analysis, and
consideration of Board diversity and
tenure, the Committee presented its
conclusions to the full Board.
The Committee considered and
agreed the process for establishing
the Advisory Panel and for recruiting
members to the Panel and to Senior
Advisor roles. Following consideration
of a skills analysis undertaken by
the Executive as to the skills and
experiences that would be needed
to support the work of the executive
and the FRC Board, the Committee
approved the appointment of a
number of existing Committee and
Council members to the Panel and to
Senior Advisor roles. The Committee
also approved an exercise to recruit
additional Panel members to ll skills
gaps that had been identied.
The Committee also recommended
several reappointments to Board
Committees to ensure the Committees
remained operational and business
as usual was not compromised as a
result of delays to recruiting NEDs to
the Board and consequential delays
to full implementation of the revised
governance structure
The Board considered
the Committee’s analysis
and agreed submission
to the SoS to inform the
recruitment of NEDs
and a permanent Chair.
This recruitment exercise
remains ongoing
The Board agreed
several recommendations
relating to Committee
reappointments
recognising the need
to ensure Committees
remain operational while
membership of the Board
was reduced
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Aera of focus Action taken Progress update
Remuneration
of the Board
and members of
the Governance
Structure
Code of
Conduct
Gifts and
hospitality
The Committee noted the SoS had
set fees for newly appointed NEDs at
a rate lower than fees to be paid to
existing NEDs. The Committee agreed
proposals that, should existing NEDs
be reappointed by the SoS, their fees
would be aligned with the fees to be
paid to newly appointed NEDs.
The Committee also considered
recommendations to be submitted
to BEIS regarding fees to be paid to
Committee Chairs and Committee
members under the new governance
structure having regard to time
commitment, complexity of the issues
presented to each Committee and
reputational impact
The Committee agreed fees to be paid
to Senior Advisors and Advisory Panel
Members in line with HMT and civil
service pay guidelines
The Committee recommended
revisions to the Code of Conduct
for Stasta and members of the
governance structure to prohibit
external appointments/directorships
at entities within the FRC’s regulatory
scope.
In accordance with the Committee
terms of reference the Committee
considered the complete register
of interest for members of the
governance structure on a quarterly
basis
The Committee recommended to the
Board minor amendments to the Gifts
& Hospitality Policy designed to clarify
disclosure requirements
The recommendations
of the Committee were
submitted to the Secretary
of State
The Code of Conduct was
approved by the Board
and updated version was
published on the website
No issues were identied as
a result of the Committee’s
reviews
Policy approved by the
Board
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Aera of focus Action taken Progress update
Pay and
performance
review
Sta matters
The Committee considered and
supported submission of the 2019/20
pay award to BEIS for sta below
Executive Committee level
The Committee also considered pay
awards for eligible members of the
Executive Committee for the 2019/20
pay award
The Committee discussed the risk
to sta retention in light of the
constraints of public sector pay
guidelines and pay freeze in 2021
The Committee considered a number
of sta matters during the year
including:
•
the introduction of a moderation
process to support the performance
management process and ensure
consistency of performance ratings.
•
the results of the annual people
survey including agreed actions and
comparison with civil service data
•
an annual report on regretted leaves
•
the Flexible Working Policy and
changes to arrangements in
advance of the oce reopening
post Covid-19 pandemic
•
sta health and morale during the
Covid-19 pandemic
The pay award was
approved and backdated
to April 2020
The Board approved
the pay awards for
eligible members of the
Executive Committee as
recommended by the
Committee
The Committee welcomed
that the risk was being
considered as part of the
development of a talent
management policy
The new moderation
process was rolled out
in July 2020 and training
was provided to managers
ahead of the end of year
review process
The Committee noted the
key trends and sought
assurances on steps being
taken to respond – these
were provided via routine
updates through the year
The Committee welcomed
expanded information on
regretted leavers
The Committee noted the
policy and that further
revisions would be required
as the organisation
continues to grow
The Committee commended
the Executive Committee on
its approach to supporting
sta and welcomed that a
number of mental health
rst aiders were trained to
support colleagues
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Aera of focus Action taken Progress update
Succession
planning
and talent
management
Board Diversity
Policy
HR strategy
•
the revised Diversity & Inclusion
Strategy that had been developed
following extensive consultation
within the FRC
The Committee considered and
endorsed a new Talent Management
Policy
The Committee considered and
supported the revised Policy, noting
the change in emphasis reecting that
appointments to the FRC Board are a
matter for the SoS
The Committee welcomed that
the New Chief People Ocer, who
joined on 22 March 2021, would be
developing an HR strategy, to include
an articulated recruitment strategy
The Committee
welcomed the strategy and
encouraged the Executive
to push for greater
disclosure of diversity data
to ensure informed actions
The Talent Management
Policy has been
implemented and
informed the 2021 senior
management succession
plan
On the recommendation
of the Committee the Board
approved the Policy, which
can be found at
www.frc.org.uk
The HR strategy is in
development and due
to be considered by the
Committee in early
autumn
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20.
Remuneration framework
The Chief Executive is the only Executive member of the Board. The performance of
the Chief Executive and other Executive Committee members is assessed against both
collective objectives set in line with the FRC business plan and individual objectives. An
overview of the remuneration framework that applied to all sta during 2020/21 is set
out below. The main components of the Chief Executive and other Executive Committee
members’ remuneration are consistent with this framework unless indicated otherwise.
Element Opportunity/
and purpose Operation output
Base salary
To provide core
remuneration
for the role,
recognising the
responsibility
for setting and
delivering the
annual FRC Plan
& Budget
Benets
To provide a
competitive and
cost eective
benets package
in line with
public sector
norms
Salaries are reviewed annually by
the Committee, which considers the
Chief Executive and other Executive
Committee members’ responsibilities,
performance and experience
alongside market trends and relevant
comparator organisations, where
available
Salaries for new Chief Executive and
other Executive Committee member
appointments are now subject to HM
Treasury approval in line with Senior
Civil Service Pay Guidance
All sta who were oered employment
prior to 1 June 2018 are eligible to
receive benets, which may include:
• dental insurance
• private health insurance
• income protection insurance
• life insurance
In aligning the FRC’s remuneration
policy more closely with the public
sector, new joiners who started from
1 June 2018 are no longer eligible for
dental or private health insurance
Any annual increase
awarded reects
movement in market
rates and increasing
competency within role.
Work to benchmark some
Executive Director roles
was undertaken by the
independent consulting
group Korn Ferry
The Chief Executive and
Executive Committee
members are required to
achieve higher ratings for
performance than other
members of sta in order to
qualify for a potential salary
increase
Individual adjustments in
excess of general market
movements may be made in
appropriate circumstances
(e.g. where the role scope
has changed or as a
reection of a signicant
development in the role)
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Element Opportunity/
and purpose Operation output
Pension
benets
To provide
competitive
retirement
benets in
line with
relevant market
comparators
Values in
Practice
Recognition
Scheme
All sta are eligible to participate in
the group personal pension scheme,
which is a dened contribution
scheme
Sta oered employment prior
to 1 June 2018 were able to elect
to take pay in lieu of pension
contributions less an amount
equivalent to Employer’s National
Insurance contributions but this has
been discontinued for sta oered
employment after 1 June 2018
The Values in Practice Scheme was
put on hold during the Covid-19
pandemic, although it should be
noted that it had previously been
agreed that the Chief Executive and
other Executive Committee members
would not be eligible to receive a
VIP award, which is a modest in-year
award scheme for specic examples
of strong performance in relation to
the FRC’s values and behaviours The
scheme is under review
A maximum of 10% of base
salary
Pay multiples
(subject to audit)
Reporting bodies are required to disclose the relationship between the remuneration
of the highest paid director in their organisation and the median remuneration of the
organisation’s workforce.
The banded remuneration of the highest paid Director, the Chief Executive Ocer, in
oce at 31 March 2021 was £330,000–335,000 (2019/20: £330,000–335,000). This was
3.87 times (2019/20: 3.82) the median remuneration of the workforce, which was £85,648
(2019/20 £87,042).
Total remuneration includes salary and benets in kind. It does not include severance
payments, or any employers’ pension allowance or payments in lieu of pension
payments. In 2020/21 no employee received remuneration in excess of the annual
equivalent remuneration of the highest paid director.
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Directors’ remuneration
Chief Executive
Employment contracts and policy on payment for loss of oce.
Notice period: The Chief Executive has a notice period of six months.
Payments for loss of oce: No payments or compensation for loss of oce have been
made in the current year.
Non-executive appointments: The former FRC Remuneration Committee agreed that
where the Chief Executive serves as a NED elsewhere, they may retain those earnings.
Non-Executive Directors
The remuneration of the Chair and future NEDs is determined by the SoS and is subject
to Senior Civil Service Pay Guidance and rules. The People Committee advises the SoS on
the remuneration to be paid following an assessment of the responsibility, workload and
time commitment to the role and by calculating a daily rate of fees comparable to those
paid by other regulators and in relation to comparable roles in the public sector.
A NED who is the Chair of any Committee is not involved in any decision relating to their
remuneration. The total remuneration and benets received are shown in the Directors’
remuneration table (page 96) and have been subject to audit (see also note 5 to the
Financial Statements).
Remuneration levels are based on the time commitment required, which may include
preparation, scheduled meetings and any additional meetings required during the year.
Non-Executive Director remuneration can be broken into the following elements:
NED fees were reviewed by the Committee in 2020 for recommendation to the SoS. Fees
for newly appointed NEDs will be £17,500 per annum, while existing members’ fees will
be reduced when their term comes for reappointment.
Board membership:
Six scheduled meetings a year
Chair (Simon Dingemans) £150,000
Interim Chair (Keith Skeoch) £75,000
Membership £25,000
Audit & Risk Committee:
Six scheduled meetings a year
Chair £5,000
Membership No additional
People Committee:
Eight scheduled meetings a year
Chair £5,000
Membership No additional
Regulatory Standards
& Codes Committee:
Four scheduled meetings a year
Chair £45,000
Membership £10,000
Conduct Committee:
11 scheduled meetings per year
Chair £65,000
Membership £10,000
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Notes:
When Directors have served for part of a year, the amounts shown are for the relevant
proportion of the year.
(1) This is Life Assurance and Group Income Protection Insurance.
(2) This is a payment to a dened contribution scheme.
(3) Keith Skeoch was a NED to 31 July 2020 and waived his fees of £11,667 in favour of
charity.
(4) Executive Directors are entitled to receive some other benets in accordance with the
remuneration framework; the benets vary depending on when their employment
with the FRC started. The gures shown are the cash equivalent of their full pay and
benets.
(5) Executive Directors’ remuneration in 2020/21 amounted to 2.6% (2019/20: 4.3%) of
total company remuneration.
Directors’ remuneration
(subject to audit)
2019/20
(1)
Pension
(2)
Total £
Non-Executive Directors
Keith Skeoch
(3)
Simon Dingemans 25,000 - - 25,000 73,462
(to 31 May 2020)
David Childs 90,000 - - 90,000 90,000
John Coomber 49,375 - - 49,375 48,125
Olivia Dickson 9,061 - - 9,061 35,000
(to 30 June 2020)
Dame Julia Unwin 70,000 - - 70,000 36,532
Jenny Watson 30,000 - - 30,000 25,000
Sub-total 320,385 - - 320,385 343,119
Executive Directors
Sir Jonathan Thompson
(4)(5)
Sub-total 342,692 1,463 33,000 377,155 181,500
Total 663,078 1,463 33,000 697,540 524,619
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21.
Directors’ Report
The Directors of the FRC (Registered number: 02486368) present their report for the
year ended 31 March 2021. This report should be read in conjunction with both the
Strategic Report pages 7-46 which includes Ethics and Compliance pages 32-33 and the
Governance Report pages 47-96, which includes the Corporate Governance Statement.
In accordance with section 414C (11) of the Companies Act 2006, the Directors have
provided disclosures and information in relation to a number of matters elsewhere
in this Annual Report. These matters, together with those required under the Large
and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008
as amended in 2013 and voluntary disclosures under the Sustainability Accounting
Standards Board (SASB), are cross-referenced in the table below.
Topic/
Reporting
responsibility
Where to nd
more information
Relevant policies
and procedures or
background reading
Page
Business model, strategy
and principal activities
Research and
development activities
Analysis of performance
and current position
Important events
aecting the FRC since
the end of the nancial
year
External trends and
factors aecting future
development and long-
term viability
Likely future
developments
Corporate Governance
Statement
Principal risks and risk
management policies
Financial risks
Review of internal
controls
Strategic report
Strategic report
Strategic report:
Performance and the
nancial statements
Strategic report
Strategic report
Strategic report
Governance and
Transparency
Strategic report:
Risk Management
Notes to the nancial
statements
Governance and
Transparency:
Audit & Risk Committee
8
11-19
11-19
9-19
11-21
11-21
50-55
43-46
115
82-86
Consultation: restoring
condence and trust
in audit and corporate
governance
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Topic/
Reporting
responsibility
Where to nd
more information
Relevant policies
and procedures or
background reading
Page
Ethics and Compliance
Section 172 statement
How we have
engaged with
business relationships
(stakeholders)
Disclosures on payment
practices
Employee engagement
Employee diversity
Statement on the
employment of disabled
persons
Gender pay gap
reporting and pay ratios
Sustainability and
climate change
considerations
Streamlined Energy
and Carbon Reporting
disclosures
Professional integrity
Information and data
security
Strategic report: Ethics
and compliance
Strategic report:
s172 and Stakeholder
Engagement
Strategic report:
s172 and Stakeholder
Engagement
Strategic report: Ethics
and compliance
Strategic report: Our
People
Strategic report: Our
People
Strategic report: Our
People
Strategic report: Our
People Remuneration
report
Strategic report:
Sustainability
Strategic report:
Environmental impact
Strategic report: Ethics
and compliance
Strategic report: Ethics
and compliance
Anti-bribery policy
Whistleblowing policies
Gifts and Hospitality
policy
Code of Conduct
Procurement policy
Modern Slavery
Statement
Payment policies
Code of Conduct
Information security
policies
32-34
26-28
26-28
32
21-25
21-25
21-25
21-25
116-118
116-118
32-33
32-33
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Directors’ Responsibilities in Respect of the Annual Report
& Financial Statements
Directors’ Responsibilities Statement
The Directors (including the Chief Executive as Accounting Ocer) are responsible for
preparing the Annual Report and Financial Statements in accordance with applicable
laws and regulations. Company law requires the Directors to prepare nancial
statements for each nancial year.
Under that law, the Directors have elected to prepare the nancial statements in
accordance with applicable law and UK accounting standards (UK Generally Accepted
Accounting Practice (GAAP)), including Financial Reporting Standard 102, the Financial
Reporting Standard applicable in the UK and Republic of Ireland. Under company law,
the Directors must not approve the nancial statements unless satised that they give a
true and fair view of the state of aairs of the Company and of the prot or loss of the
Company for the period.
In preparing these nancial statements the Directors are required to:
• select suitable accounting policies and apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable UK accounting standards have been followed, subject to any
material departures disclosed and explained in the nancial statements;
• ensure a system of internal controls are in place to enable the preparation of nancial
statements that are free from material misstatement, whether due to fraud or error;
and
• prepare the nancial statements on the going concern basis unless it is inappropriate
to presume that the FRC will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sucient to show and explain the FRC’s transactions and disclose with reasonable
accuracy at any time the nancial position of the FRC and enable them to ensure that
the nancial statements comply with the Companies Act 2006. They are also responsible
for safeguarding the assets of the FRC and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
In assessing the Going Concern, the Board is satissed that the FRC will continue to
operate for a minimum of 12 months after the approval of the nancial statements. In
addition, BEIS provides the FRC with conrmation of support that would help the FRC
meet its nancial obligations, if necessary, that would allow the FRC to continue its
operations for a minimum of twelve months.
Board of Directors
We have included information on the names of the individuals, who, at any time during
the nancial year, were Directors of the FRC on pages 59-63. The attendance of the
Directors at the meetings held during the year is also on page 65.
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Appointment of Directors
Directors are appointed for xed terms, which may be renewed, rather than being
submitted for re-election at regular intervals. Information on changes of the Company’s
Directors during the year, including appointments made during the year, can be found
on pages 59-63.
Retirement, Vacation and removal of Directors
In accordance with the Articles of Association (5.1) the Secretary of State, or his or her
duly authorised representative, may at any time remove any person so appointed. A
director of the Company shall retire from oce upon the expiry of the period specied
in the most recent notice of his or her appointment or reappointment received by
the Company, or if no period is specied therein, upon the third anniversary of such
appointment or reappointment. The oce of director shall be vacated if the director:
i. is removed from oce pursuant to the provisions of Articles 5.1 above;
ii. resigns his or her oce by notice in writing received at the registered oce of the
Company;
iii. ceases to be a member of the Company;
iv. ceases to be a director by virtue of any provision of the Companies Acts or otherwise
becomes prohibited by law from being a director; or
v. in the case of the Chief Executive, ceases to hold that position.
Directors and Directors’ insurance and indemnities
Under the terms of the FRC’s Articles of Association, all Directors are members of the
FRC, and each has undertaken to guarantee the liability of the FRC up to an amount not
exceeding £1.
There are no other members and no dividend is payable.
The FRC purchased and maintained throughout the nancial year Directors’ and
Ocers’ liability insurance in respect of itself and for its Directors and Ocers. This gives
appropriate cover for any legal action brought against the FRC or its Directors or Ocers.
Articles of Association
The Company’s Articles may be amended by a special resolution of the Company
members. During the year the Company amended the Articles to reect the introduction
of the new governance structure and to reduce the quorum for directors and general
meetings to two thirds of directors holding oce.
Related party transactions
The FRC is a public body operating under a remit letter from BEIS. Any related party
transactions arise in the normal course of business and are not material.
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Political donation disclosures
As a central government body, the FRC is compliant with Managing Public Money.
Political aliations and disclosures are not consistent with the principles of Managing
Public Money. No political donations were made during the year.
Key contracts
The FRC has a number of key contracts. However, the FRC performs several checks on
the providers of those contracts including nancial health checks. As part of the FRC’s
Business Continuity Planning, scenario testing is undertaken in respect of the failure of
one of the rms providing the key contracts.
Company’s trading activities
The FRC is not a trading company. There have been no changes in corporate structure.
Financial risk management
More detail can be found in the Notes to the Financial Statements on pages 115 to 126.
Disclosure to the Auditor
The Directors, including the Chief Executive as Accounting Ocer, at the date of this
report, conrm that, as far as they are aware, there is no relevant audit information of
which the FRC’s auditor is unaware. Each Director has taken all steps that they ought
to have taken as a Director in order to make themselves aware of any relevant audit
information and to establish that the FRC’s auditor is aware of that information.
Auditors
The NAO on behalf of the Comptroller & Auditor General has expressed its
willingness to remain in oce and the Audit & Risk Committee has recommended its
reappointment to the Board. A resolution to reappoint the auditors and to authorise
the Directors to determine their remuneration will be proposed at the Annual General
Meeting of the Company.
Approved by the Board of Directors on 1 July 2021 and signed on its behalf by:
Company Secretary
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Financial Reports
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22. Independent Auditor’s Report to the Members
Opinion on nancial statements
I have audited the nancial statements of the Financial Reporting Council Limited for the year ended 31 March
2021 which comprise the prot and loss account, the balance sheet, the statement of changes in equity, the
cash ow statement and the related notes, including the signicant accounting policies. The nancial reporting
framework that has been applied in their preparation is applicable law and the United Kingdom Accounting
Standards (United Kingdom General Accepted Accounting Practice) including FRS102, the Financial Reporting
Standard applicable in the United Kingdom (UK) and Ireland.
I have also audited the information in the Remuneration Committee Report that is described in that report as
having been audited.
In my opinion the nancial statements:
• give a true and fair view of the state of the company’s aairs as at 31 March 2021 and of the loss for the year
then ended; and
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on regularity
In my opinion, in all material respects the income and expenditure recorded in the nancial statements have been
applied to the purposes intended by Parliament and the nancial transactions recorded in the nancial statements
conform to the authorities which govern them.
Basis for opinions
I conducted my audit in accordance with International Standards on Auditing (ISAs) (UK), applicable law and
Practice Note 10 ‘Audit of Financial Statements of Public Sector Entities in the United Kingdom’. My responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the nancial
statements section of my report.
Those standards require me and my sta to comply with the Financial Reporting Council’s Revised Ethical Standard
2019. I have also elected to apply the ethical standards relevant to listed entities. I am independent of the Financial
Reporting Council Limited in accordance with the ethical requirements that are relevant to my audit of the nancial
statements in the UK. My sta and I have fullled our other ethical responsibilities in accordance with these
requirements.
I believe that the audit evidence I have obtained is sucient and appropriate to provide a basis for my opinion.
The framework of authorities described in the table below has been considered in the context of my opinion on
regularity.
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Framework of Authorities
Authorising legislation
HM Treasury and related
authorities
Companies Act 2006
Statutory Audit and Third Country Auditor Regulations (SATCAR) 2013, 2016 and
2017
Local Audit (Delegation of Functions) and Statutory Audit (Delegation of functions)
Order 2014
Local Audit and Accountability Act 2014
Managing Public Money
Cabinet Oce Controls
Conclusions relating to going concern
In auditing the nancial statements, I have concluded that the Financial Reporting Council Limited’s use of the
going concern basis of accounting in the preparation of the nancial statements is appropriate.
My evaluation of the director’s assessment of the entity’s ability to continue to adopt the going concern basis
of accounting included review of management forecasts and a signed Letter of Support from the Department
of Business, Energy & Industrial Strategy, conrming that the Department would make appropriate nancial
resources available to support the Financial Reporting Council with meeting its nancial obligations, should
that be necessary.
Based on the work I have performed, I have not identied any material uncertainties relating to events or
conditions that, individually or collectively, may cast signicant doubt on the Financial Reporting Council Limited’s
ability to continue as a going concern for a period of at least twelve months from when the nancial statements
are authorised for issue.
In relation to the entities reporting on how they have applied the UK Corporate Governance Code, I have nothing
material to add or draw attention to in relation to the directors’ statement in the nancial statements about
whether the director’s considered it appropriate to adopt the going concern basis of accounting.
My responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report.
Overview of my audit approach
Key audit matters
Key audit matters are those matters that, in my professional judgment, were of most signicance in the audit of the
nancial statements of the current period and include the most signicant assessed risks of material misstatement
(whether or not due to fraud) identied by the auditor, including those which had the greatest eect on: the overall
audit strategy; the allocation of resources in the audit; and directing the eorts of the engagement team.
These matters were addressed in the context of the audit of the nancial statements as a whole, and in forming my
opinion thereon. I do not provide a separate opinion on these matters.
I consider the following areas of particular audit focus to be those areas that had the greatest eect on my overall
audit strategy, the allocation of resources in my audit and directing the eorts of the audit team in the current year.
These matters were addressed in the context of my audit of the nancial statements as a whole, and in forming my
opinion thereon, and I do not provide a separate opinion on these matters.
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This is not a complete list of all risks identied by my audit but only those areas that had the greatest eect on my
overall audit strategy, allocation of resources and direction of eort. I have not, for example, included information
relating to the work I have performed around expenditure, an area where my work has not identied any matters
to report.
The areas of focus were discussed with the Audit and Risk Committee; their report on matters that they considered
to be signicant to the nancial statements is set out on pages 82-87.
In this year’s report the following changes to the risks identied have been made compared to my prior year report:
• Accounting and recognition of enforcement transactions and balances has not been recognised as a signicant
risk or key audit matter in 2020-21. I selected this area in my rst audit of the Financial Reporting Council last
year, having completed that audit, I concluded that this area was well controlled and relatively straightforward
and as such there was limited inherent risk of the balances being materially misstated.
• Going concern is not listed as a key audit matter in 2020-21. The economic uncertainty which existed at the end of
2019-20, and which continues as a result of the Covid-19 pandemic, is mitigated by virtue of the letter of support
that the Financial Reporting Council has received from the Department of Business, Energy & Industrial Strategy.
Risk of Fraud in Revenue Recognition
Description of risk
It is a rebuttable presumption that there is a signicant risk of error in revenue recognition. The risk of fraud in
revenue recognition has been considered to be one of the most signicant assessed risks of material misstatement
or irregularity for the Financial Reporting Council Limited, as it receives income from a variety of sources (as
reected in the revenue note in the nancial statements) and therefore has a heightened inherent risk.
Whilst I understand that there have been no signicant changes to the sources of revenue nor the accounting
policies in this year, and the quantum has remained relatively static at £38.1m (2019/20 £39.5m), the following risk
characteristics exist:
• Income arises from a number of sources, and several of these are voluntary;
• The FRC use a third-party service organisation to invoice voluntary levies, although those levies are received
directly into a Financial Reporting Council bank account; There are material accrued and deferred income
balances on the year-end balance sheet; and
• The continuance of the Covid-19 pandemic may put pressure on the ability to collect its income receivables.
Therefore, I have identied this as a key audit matter.
How the scope of my
audit responded to the
risk
My team reviewed the design and implementation of controls in place over revenue.
My team reviewed all material revenue streams to conrm that revenue is recognised
appropriately in line with the FRC’s stated accounting policies, and FRS102. Revenue
in respect of voluntary contributions (levy revenue) is recognised on a cash basis
therefore we were able to agree a sample of levy receipts back to bank.
My team reviewed the recognition and recoverability of trade receivables, accrued
and deferred income at year end to assess the appropriateness of recognition and
carrying values. No evidence of management bias was identied during the course
of our work.
Key observations
My testing results were satisfactory.
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Risk of Management Override of Controls
Description of risk
ISAs include a non-rebuttable risk that management could perpetrate fraud or manipulate accounting records.
Accordingly, I am required to perform procedures in response to this risk. Whilst our other signicant risk was also
designed to respond to the risk of management override of controls, due to the unpredictable nature of this risk
we also perform more general procedures to gain assurance. Account areas that are particularly susceptible to
management override of control are those areas where there has been a change to an established system/process,
and account areas where there are high levels of estimation and judgement.
How the scope of my audit
responded to the risk
My team reviewed key nancial processes and controls and carried out
transaction testing on a sample basis.
My team used data analytics to review the manual journals posted looking
for key risk factors identied through our discussion of potential fraud and
management override risks, and they tested any such journals. We also
considered accounting estimates and judgements for evidence of bias,
including a retrospective review of judgements and assumptions.
My team reviewed the general ledger and bank statements, committee
papers and our wider audit work across the nancial statements to support
our discussions with management in seeking to identify signicant transactions
that appeared to be outside the normal course of business.
Key observations
My testing results were satisfactory.
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Application of materiality
Materiality
I applied the concept of materiality in both planning and performing my audit, and in evaluating the eect of
misstatements on my audit and on the nancial statements. This approach recognises that nancial statements are rarely
absolutely correct, and that an audit is designed to provide reasonable, rather than absolute, assurance that the nancial
statements are free from material misstatement or irregularity. A matter is material if its omission or misstatement
would, in the judgement of the auditor, reasonably inuence the decisions of users of the nancial statements.
Based on my professional judgement, I determined overall materiality for the Financial Reporting Council Limited’s
nancial statements as a whole as follows:
Performance materiality
I set performance materiality at a level lower than materiality to reduce the probability that, in aggregate,
uncorrected and undetected misstatements exceed the materiality for the nancial statements as a whole.
Performance materiality was set at 85% of materiality for the 2020-21 audit (2019-20: 65%). In 2019-20, as the audit
was new to the NAO, I determined a lower performance materiality to take account of the unfamiliarity, however,
I found no signicant errors in our prior year audit and therefore deemed 85% more appropriate for 2020-21. In
determining materiality and performance materiality, we have also considered the uncorrected misstatements
identied in the previous period.
Other materiality considerations
As well as quantitative materiality there are certain matters that, by their very nature, would if not corrected
inuence the decisions of users, for example, any errors reported in the Accountability Report. Assessment of
such matters would need to have regard to the nature of the misstatement and the applicable legal and reporting
framework, as well as the size of the misstatement.
I applied the same concept of materiality to my audit of regularity. In planning and performing audit work in
support of my opinion on regularity and evaluating the impact of any irregular transactions, I took into account
both quantitative and qualitative aspects that I consider would reasonably inuence the decisions of users of the
nancial statements.
Error Reporting Threshold
I agreed with the Audit and Risk Committee that I would report to it all uncorrected misstatements identied
through my audit in excess of £8k, as well as dierences below this threshold that in my view warranted reporting
on qualitative grounds. I also report to the Audit Committee on disclosure matters that I identied when assessing
the overall presentation of the nancial statements.
Total unadjusted audit dierences reported to the Audit Committee have increased net assets by £5k.
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Materiality
Basis for determining materiality
Rationale for the benchmark
applied
£400,000 (Prior year £195k)
1% of total expenditure of £40m (Prior year £39m; 2018/19 £29m)
I considered a number of benchmarks for materiality including prot,
revenue, asset measures and equity. Given that the Financial Reporting
Council Limited is a regulator, it incurs costs in fullling its responsibilities and
collects funding sucient to cover those costs. Consequently, the users of the
nancial statements will principally be interested in the cost of the Financial
Reporting Council discharging its responsibilities. Mindful of this I identied
total expenditure as the key driver.
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Audit Scope
The scope of my audit was determined by obtaining an understanding of the Financial Reporting Council Limited
and its environment, including controls and assessing the risks of material misstatement.
My team and I met virtually with senior members of the company’s nance team and members of the Executive
and Audit Committee as part of the audit planning process. This resulted in the identication of two signicant
risks within the audit plan, which are shown in key audit matters above. This dialogue continued throughout
the audit process, as we reassessed and re-evaluated audit risks where necessary, and amended our approach
accordingly. This included consideration, for example, of the impact of the BEIS consultation on audit and
corporate governance reform on the company’s going concern assessment.
Our planning and audit work procedures were undertaken remotely, following the continued restrictions in
place as a result of the Covid-19 pandemic, which resulted in both FRC and my audit team working remotely. We
continued to use alternative audit procedures to enable my audit team to complete testing of xed assets where
we would normally require presence in the FRC oces.
I have provided a regularity opinion within this report. My team discussed the framework of authorities with
management and reviewed the results of transaction testing to determine whether any evidence of material
irregularity was noted.
Other information
The other information comprises information included in the annual report, but does not include the parts of the
Remuneration Report described in that report as having been audited, the nancial statements and my auditor’s
report thereon. The directors are responsible for the other information. My opinion on the nancial statements
does not cover the other information and except to the extent otherwise explicitly stated in my report, I do not
express any form of assurance conclusion thereon. In connection with my audit of the nancial statements, my
responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the nancial statements or my knowledge obtained in the audit or otherwise appears to be
materially misstated. If I identify such material inconsistencies or apparent material misstatements, I am required
to determine whether this gives rise to a material misstatement in the nancial statements themselves. If, based on
the work I have performed, I conclude that there is a material misstatement of this other information, I am required
to report that fact.
I have nothing to report in this regard.
Opinion on other matters prescribed by the Companies Act 2006
In my opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in In my
opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance
with the Companies Act 2006.
In my opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic and Directors’ Report for the nancial year for which the nancial
statements are prepared is consistent with the nancial statements and those reports have been prepared in
accordance with applicable legal requirements;
• the information about internal control and risk management systems in relation to nancial reporting
processes, and about share capital structures, in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Rules
and Transparency Rules sourcebook made by Financial Conduct Authority (the FCA Rules), is consistent with the
nancial statements and has been prepared in accordance with applicable legal requirements; and
• Information about the company’s corporate governance code and practices and about its administrative,
management and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the
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Matters on which I report by exception
In the light of the knowledge and understanding of the Financial Reporting Council Limited and its environment
obtained in the course of the audit, I have not identied material misstatements in:
• the strategic report or the directors’ report; or
• the information about internal control and risk management systems in relation to nancial reporting processes
and about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 of the FCA Rules.
I have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires
me to report to you if, in my opinion:
• adequate accounting records have not been kept or returns adequate for my audit have not been received
from branches not visited by my sta; or
• the nancial statements and the parts of the Directors’ remuneration report to be audited are not in agreement
with the accounting records and returns; or certain disclosures of director’s remuneration specied by law are
not made; or
• a corporate governance statement has not been prepared by the parent company; or
• I have not received all of the information and explanations I require for my audit.
Corporate Governance Statement
The FRC voluntarily applies the UK Corporate Governance Code and reports on its compliance or non-compliance
as appropriate. In relation to this reporting, I have nothing material to add or draw attention to in this certicate.
Based on the work undertaken as part of my audit, I have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent with the nancial statements or my knowledge obtained
during the audit:
• Directors’ statement with regards the appropriateness of adopting the going concern basis of accounting and
any material uncertainties identied set out on pages 54 and 98;
• Directors’ explanation as to its assessment of the entity’s prospects, the period this assessment covers and why
they period is appropriate set out on page 54;
• Directors’ statement on fair, balanced and understandable set out on page 46;
• Board’s conrmation that it has carried out a robust assessment of the emerging and principal risks set out on
page 73;
• The section of the annual report that describes the review of eectiveness of risk management and internal
control systems set out on page 65; and
• The section describing the work of the audit committee set out on pages 82 to 86.
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Responsibilities of the Directors for the nancial statements
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for:
• the preparation of the nancial statements in accordance with the applicable nancial reporting framework and
for being satised that they give a true and fair view;
• internal controls as directors determine is necessary to enable the preparation of nancial statement to be free
from material misstatement, whether due to fraud or error.
• assessing the Financial Reporting Council Limited’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the directors either
intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the nancial statements
My objectives are to obtain reasonable assurance about whether the nancial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue a report that includes my opinion. Reasonable
assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to inuence the
economic decisions of users taken on the basis of these nancial statements.
I design procedures in line with my responsibilities, outlined above, to detect material misstatements in respect of
non-compliance with laws and regulation, including fraud.
My procedures included the following:
• Inquiring of management, the Financial Reporting Council Limited’s Head of Internal Audit and those charged
with governance, including obtaining and reviewing supporting documentation relating to the Financial
Reporting Council Limited policies and procedures relating to:
–
instances of non-compliance;
– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or
alleged fraud; and
– the internal controls established to mitigate risks related to fraud or non-compliance with laws and
regulations including the Financial Reporting Council Limited’s controls relating to the Companies Act
2006; SATCAR 2013, 2016 & 2017; Local Audit (Delegation of Functions) and Statutory Audit (Delegation of
functions) Order 2014; Local Audit and Accountability Act 2014R; Managing Public Money; Cabinet Oce
Controls; employment law; pensions regulations; and tax laws and regulations.
• discussing among the engagement team, regarding how and where fraud might occur in the nancial
statements and any potential indicators of fraud. As part of this discussion, I identied potential for fraud in the
following areas: revenue recognition and posting of unusual journals;
• obtaining an understanding of the Financial Reporting Council’s framework of authority as well as other
legal and regulatory frameworks that the Financial Reporting Council operates in, focusing on those laws
and regulations that had a direct eect on the nancial statements or that had a fundamental eect on the
operations of the Financial Reporting Council. The key laws and regulations I considered in this context included
the Companies Act 2006; SATCAR 2013, 2016 & 2017; Local Audit (Delegation of Functions) and Statutory Audit
(Delegation of functions) Order 2014; Local Audit and Accountability Act 2014R; Managing Public Money; and
Cabinet Oce Controls; employment law; pensions regulations; and tax laws and regulations.
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In addition to the above, my procedures to respond to identied risks included the following:
•
reviewing the nancial statement disclosures and testing to supporting documentation to assess compliance
with relevant laws and regulations discussed above;
•
enquiring of management, the Audit Committee and in-house legal counsel concerning actual and potential
litigation and claims;
•
reading minutes of meetings of those charged with governance and the Board
•
in addressing the risk of fraud through management override of controls, testing the appropriateness of journal
entries made throughout the year and other adjustments; assessing whether the judgements made in making
accounting estimates are indicative of a potential bias; and evaluating the business rationale of any signicant
transactions that are unusual or outside the normal course of business
•
in addressing the risk of fraud through revenue recognition, substantively testing all material revenue streams
to check revenue has been recognised in line with accounting policies; reviewing recognition and receivability
of trade receivables and conrming all income received was in line with relevant laws and regulation; and
•
considering the applicability of Managing Public Money and the Cabinet Oce controls in all of my transaction
and disclosure testing.
I also communicated relevant identied laws and regulations and potential fraud risks to all engagement
team members including internal specialists and signicant component audit teams and remained alert to any
indications of fraud or non-compliance with laws and regulations throughout the audit.
A further description of my responsibilities for the audit of the nancial statements is located on the Financial
Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities
. This description forms part of my certicate.
In addition, I am required to obtain evidence sucient to give reasonable assurance that the income and
expenditure reported in the nancial statements have been applied to the purposes intended by Parliament and
the nancial transactions conform to the authorities which govern them.
I communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and signicant audit ndings, including any signicant deciencies in internal control that I
identify during my audit.
(Senior Statutory Auditor)
For and on behalf of the
National Audit Oce
157-197 Buckingham Palace Road
Victoria
SW1W 9SP
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23.
Financial statements
The Financial Reporting Council Ltd
Prot and Loss account for the year ended 31 March 2021
2020/21
2019/20
£’000
£’000
Revenue 2 38,034 39,523
Operating expenses 3
(39,648 )
(38,861 )
Operating prot/ (loss) 662
(1,614 )
Interest receivable 0 38
Prot on ordinary activities before taxation 700
(1,614 )
Tax on prot/(loss) on ordinary activities 4 0
(7 )
Prot/ (loss) for the nancial year 693
(1,614 )
Balance Sheet at 31 March 2021
2021
2020
£’000
£’000
Fixed assets
Intangible assets 7 31 34
Tangible assets 8 1,919 2,172
Current assets
Debtors 9 4,481 6,644
Current asset investments 10 0 0
Cash at bank and in hand 10 15,579 16,037
Creditors – amounts falling due within one year 11
(5,869 )
(6,819 )
Net current assets 14,191 15,862
Total assets less current liabilities 16,141 18,068
Creditors – amounts falling due after more than one year 12
(1,010 )
(1,357 )
Provisions for liabilities 14
(297 )
(263 )
Net assets 14,834 16,448
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Capital and reserves
Accounting, auditing and corporate governance:
– General reserve 5,118 7,080
– Corporate reporting review legal costs fund 2,000 2,000
Actuarial standards and regulation:
– General reserve 5,716 5,368
– Actuarial case costs fund 2,000 2,000
The nancial statements and notes on pages 112-126 were approved by the Board of Directors on 1 July 2021 and
signed on its behalf by:
Sir Jonathan Thompson Keith Skeoch
Chief Executive Ocer and Accounting Ocer Chairman
Statement of changes in equity for the year ended 31 March 2021
At 31 March 2019 6,928 2,000 4,827 2,000 15,755
Prot for the year 152 — 541 — 693
At 31 March 2020 7,080 2,000 5,368 2,000 16,448
Prot/ (loss) for the year (1,962 ) — 348 — (1,614 )
At 31 March 2021 5,118 2,000 5,716 2,000 14,834
As the FRC is a public body the use of cash represented by general reserves is subject to approval by the
Government.
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Cash ow statement for the year ended 31 March 2021
2020/21 2019/20
£’000
£’000
Cash ows from operating activities
Operating prot/ (loss)
(1,614 ) 662
Adjustments for:
– Depreciation and amortisation 574 641
– Increase in dilapidation provision 34 32
– (Increase)/Decrease in trade and other debtors 9 2,163
(802 )
– Increase/(Decrease) in trade and other creditors 11
(1,297 )
(7,042 )
Net cash inow from operations
(140 )
(6,509 )
Corporation tax paid
(7 )
(15 )
Total cash (outow)/inow from operating activities (6,524 )
(147 )
Cash ows from investing activities
Purchase of tangible & intangible assets
(318 )
(837 )
Current asset investments sold 0 5,530
Interest received 0 49
Total cash outow from investing activities 4,742
(318 )
Foreign exchange translation adjustment 7
(3 )
Net increase in cash and cash equivalents
(458 )
(1,785 )
Cash and cash equivalents at 1 April 10 16,037 17,822
Cash and cash equivalents at 31 March 10 15,579 16,037
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24.
Notes to the nancial statements
1.
Principal accounting policies
Kingdom, and its registered oce is 8th oor , 125 London Wall , London , EC2Y 5AS . The company’s registered
number is 02486368 .
The following principal accounting policies are those policies that have been applied consistently in dealing with
transactions and balances that are considered material to the FRC.
The nancial statements are prepared on the going concern basis of accounting. The Directors took into account
the publication of the Independent Review of the Financial Reporting Council in December 2018, and the
Government’s response to, and initial consultation on the recommendations of that review, which was issued in
March 2019.
In time, the Directors expect the FRC to become the new statutory regulator: the Audit, Reporting and Governance
Authority (ARGA). ARGA will assume the existing functions of the FRC but will have a wider range of powers
and functions, and there will be a programme of transformation for the FRC to transition into the new statutory
regulator. However, in assessing what might happen in the next 12 months, the Directors consider that the FRC
will not cease operating and will continue to meet its debts as they fall due. In addition, BEIS provides the FRC
with conrmation of support that would help the FRC meet its nancial obligations, if necessary, that would allow
the FRC to continue its operations for a minimum of 12 months from the date of approval of these nancial
statements.
a)
Basis of Preparation
. The Triennial review 2017 amendments
to FRS 102 were applied for the rst time in the FRC’s nancial statements for the year ended 31 March 2018 and
continue to be applied in these nancial statements, which is prior to their eective date; they have not had an
impact on the reported results or nancial position of the FRC, but some changes to disclosure were made.
These nancial statements are prepared on the historical cost basis.
The preparation of nancial statements requires the use of estimates and assumptions that aect the application
of policies and reported amounts of assets and liabilities, income and expenses. Although these estimates and
associated assumptions are based on historical experience and management’s best knowledge of current events
and actions, the actual results may ultimately dier from those estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Provisions for dilapidations
The FRC has an obligation to make good the conditions of the premises at 125 London Wall, in accordance with
the lease agreement at the end of the lease term. Provisions for dilapidations is the area involving estimates and
judgements where there is the greatest potential risk of a material adjustment in future years. The provision is
expected to be utilised at the end of the lease.
Accounting estimate – The current provision is based on management’s current best estimate of the future
obligation. This year the estimate draws upon a current year valuation report provided by a third-party surveyor.
The provision is expected to be utilised at the end of the lease.
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Accounting judgement – In making the estimate management has exercised judgement about the likely future
outcomes, including factors such as building and material costs. However various factors and changes in
circumstances could aect any amount payable in the future.
Presentation of nancial statements
The presentational and functional currency is the British Pound Sterling.
b)
Consolidation
The FRC has one subsidiary, UK Accounting Standards Endorsement Board Limited. The subsidiary has not traded
during the year and, as it is not material to the nancial performance and position of the FRC, consolidated
nancial statements have not been prepared.
c)
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. The FRC has predominantly the
following sources of revenue:
•
Revenue received from preparers, pension and insurance levies are voluntary contributions and are recognised
on a cash basis.
•
The following revenue is received from participants to fund specic activities:
•
Revenue receivable from RSBs for the FRC’s activities as the competent authority for Audit in the UK is
recognised on an accruals basis. Specically, revenue receivable from RSBs in respect of Audit Quality
Review and Audit Supervision costs is recognised as the costs to be recovered are incurred in each nancial
year.
•
Revenue receivable from various professional accounting bodies in respect of Accountancy disciplinary case
costs and from RSB’s in respect of Enforcement case costs is recognised as the costs to be reimbursed are
incurred in each nancial year.
•
Revenue receivable from the CCAB bodies are based on non-statutory arrangements between the CCAB,
FRC and BEIS and are recognised on an accruals basis.
In addition there are some other smaller sources of revenue:
1. Revenue in respect of publications of books, guidance and standards is recognised on sale of goods or delivery
of services.
2. Revenue in respect of inspection income for third-country audit, the NAO, the Public Sector Audit Appointments
and Crown Dependencies is recognised as the work is delivered and the other party is required to pay.
Revenue in respect of XBRL taxonomy development activity is recognised as cost is incurred and the other party
agrees that the project requirements have been met.
d)
Tangible and intangible assets
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Tangible assets
Oce equipment 3 years
Fixtures, ttings & furniture Lease term
Leasehold improvements Lease term
Intangible assets
Capitalised software 3 years
Although the expected useful lives of some of these assets extend beyond the possible life of the FRC, as it will
be replaced by ARGA, the timing of this is currently uncertain. BEIS has indicated that the existing assets (and
liabilities) of the FRC will transfer to ARGA as part of the transition. Therefore, in reviewing the estimates of the
useful lives and residual values of the tangible and intangible assets the Directors do not expect a signicant
change in the consumption of the assets and the useful lives and residual values have not been revised.
e)
Financial Instruments
Financial assets and nancial liabilities are recognised when the FRC becomes a party to the contractual provisions
of the nancial instrument.
Cash and cash equivalents
These comprise cash at bank and other short-term highly liquid bank deposits with an original maturity of three
months or less.
These comprise bank deposits with an original maturity of more than three months but less than one year.
Debtors do not carry any interest and are stated at their nominal value. Appropriate allowances for estimated
irrecoverable amounts are recognised in the prot and loss account when there is objective evidence that the asset
is impaired.
Trade creditors are not interest-bearing and are stated at their nominal value.
f) Case costs and nancial sanctions
Case costs
The legal and professional costs of accountancy and actuarial disciplinary cases and corporate reporting review
cases incurred in the period are included in the nancial statements on an accruals basis. Provision is made for
the future costs of any disciplinary cases only where the contract is onerous, the costs are unavoidable and they
represent a present obligation at the balance sheet date.
Financial sanctions and cost awards receivable
Case costs awards receivable in respect of accountancy disciplinary cases, which are due to the relevant participant
body under the Accountancy Scheme, are included in the income statement of the FRC, as a reduction to case
costs incurred and associated revenue receivable. Fines received are not included in the nancial statements as the
FRC acts only as a mechanism whereby the nes are transferred from one party to another.
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Fines receivable and case costs awards in respect of actuarial disciplinary cases are retained and included within
revenue in the period in which the nes and case costs become due and collectable. Although the FRC aim to
complete a case within two years, it is dicult to predict the amount of costs and ne awards during the year.
g) Components of equity
As set out in the statement of changes in equity, equity comprises the general reserves of the FRC and two costs
funds. As the FRC is a public body the use of cash represented by general reserves is subject to approval by the
Government.
h) Costs funds
The FRC has two costs funds: the Corporate Reporting Review Legal Costs Fund and the Actuarial Case Costs Fund.
Contributions have been received to enable the Conduct Committee to take steps to pursue compliance with
certain requirements of the Companies Act 2006 and applicable accounting standards and to investigate
departures from those requirements and standards. Those funds may be used only for this purpose and may not
be used to meet other costs incurred by the FRC. The FRC may be liable to repay the balance on the Legal Costs
Fund to the contributors if it ceases while it continues to be authorised by the SoS for the BEIS for the purposes of
section 456 of the Companies Act 2006.
The Legal Costs Fund is currently maintained at £2m. Where use is made of these funds in the year, the funds are
replenished the following year from the levies. BEIS has conrmed that if the Legal Costs Fund falls below £1m in
any one year, it will make a grant to cover legal costs subsequently incurred in that year.
The Actuarial Case Costs Fund consists of contributions received from the Institute and Faculty of Actuaries and
through levies on pension schemes and insurance companies. The fund is used to fund investigations into potential
misconduct by actuaries and any subsequent prosecutions.
i) Deferred lease incentives
Deferred lease incentives are released on a straight line basis over the term of the lease.
j)
Provision for dilapidations
A provision for dilapidations in respect of leased property is recognised based on the estimated amount required
to settle obligations under the lease as at the balance sheet date.
k)
Lease Payments
Rentals are paid on a straight-line basis over the lease period with incentives being treated as set out in the policy
given.
l)
Taxation
The FRC is subject to Corporation Tax only on its interest receivable income. There are no temporary dierences
between the recognition of that income in the nancial statements and the tax computation. Accordingly, there is
no provision for deferred tax.
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2.
Revenue
2020/21
2019/20
£’000
£’000
Preparer’s levy
15,407
14,364
Insurance and pension levies
1,910
1,881
Accountancy professional bodies
5,577
4,594
Actuarial profession
210
247
Publications
623
793
Other
175
172
Sub-total 23,902 22,051
Accountancy professional bodies
9,936
8,014
Other income
1,294
1,276
Sub-total 11,230 9,290
Accountancy professional bodies
9,156
9,062
– Less cost awards recovered
(6,564)
(1,454)
Sub-total 2,592 7,608
Insurance and pension levies
79
332
Sub-total 79 332
Companies House
231
242
Sub-total 231 242
Total 38,034 39,523
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3.
Operating expenses
2020/21
2019/20
£’000
£’000Core sta and related people costs (note 5) 29,233 23,840
IT and facility costs 2,781 2,648
Lease expense 815 818
Depreciation and amortisation costs
574 641
Auditor’s remuneration:
– audit 58 64
– non-audit services 0 0
XBRL taxonomy development costs 231 242
Accountancy and actuarial case costs, gross
9,235
9,394
– Less cost awards recovered
(6,564 )
(1,454 )
Accountancy and actuarial case costs, net 2,671 7,940
Other operating expenses
– Travel and conferences 12 390
– Legal and professional fees 1,168 568
– Contribution to EFRAG 254 310
– All other costs 1,851 1,400
Total operating
expenses 39,648 38,861
4.
Taxation
Corporation Tax at an eective rate of 19 % on interest income of £76 (2019/20: £38,000 ).
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5.
Sta and related people costs (including Directors)
2020/21
2019/20
£’000
£’000
Permanent sta:
Salaries 24,126 19,673
Social security costs 2,879 2,367
Pension costs 2,279 1,755
Total permanent sta costs 23,795
29,284
Other people related costs:
Seconded sta and contractors
805
341
Fees paid to Board, Committee and Council members
873
1,193
Other costs
522
533
Total sta and related people costs 25,862
31,484
Sta costs transferred to cases
(2,251)
(2,022)
Total core sta and related people costs 29,233 23,840
2020/21
2019/20
Average no of permanent sta employed 281 227
Directors’ emoluments (included in sta costs)
2020/21
2019/20
£’000
£’000
Fees 665 928
Other pension costs 33 17
Total Directors’ emoluments (see page 47) 945
698
Social security costs 83 111
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6.
Financial risk management
The FRC’s operations expose it to some nancial risks. Management continuously monitors these risks with a view
to protecting the FRC against the potential adverse eects of these nancial risks. There has been no signicant
change in these nancial risks since the prior year.
Financial instruments
The FRC’s basic nancial instruments in both years comprise cash in hand, current investments, loans, debtors and
creditors that arise directly from its operations. A Government bank account has been opened for the FRC and
from May 2019 money from the commercial bank account and matured deposits have been transferred to FRC
bank accounts set up with the Government Bank Service (GBS).
The nancial instruments include surplus funds that, subject to BEIS approval, will be used to fund future operating
costs including case costs. The FRC has no long-term borrowings or other nancial liabilities besides creditors.
Credit risk
It is the FRC’s policy to assess its debtors for recoverability on an individual basis and to make provisions when
considered necessary. In assessing recoverability management takes into account any indicators of impairment up
until the reporting date.
Depositing funds with commercial banks exposes the FRC to counter-party credit risk. At 31 March most of the
FRC’s cash was held within the GBS where funds are held overnight by HMT.
Interest rate risk
Prior to opening up Government bank accounts, the FRC invested the majority of its surplus funds in highly liquid
short-term deposits. The GBS bank accounts do not accrue receivable interest or incur bank charges.
Liquidity risk
The FRC maintains sucient levels of cash and cash equivalents and manages its working capital by carefully
reviewing forecasts on a regular basis to meet the requirements for its day-to-day operations.
7.
Intangible assets
Cost at 1 April 2020 96
Additions 27
Disposals -
Cost at 31 March 2021 123
Amortisation at 1 April 2020 62
Disposals -
Charge for year 30
Amortisation at 31 March 2021 92
Net book value at 31 March 2021 31
Net book value at 31 March 2020 34
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8.
Tangible assets
Cost at 1 April 2020 2,467 417 973 3,857
Additions — 154 137 291
Disposals 0 0 0 0
Cost at 31 March 2021 2,467 571 1,110 4,148
Depreciation at 1 April 2020 1,318 237 130 1,685
Charge for year 229 133 182 544
Disposals 0 0 0 0
Depreciation at 31 March 2021 1,547 370 312 2,229
Net book value at 31 March 2021 920 201 798 1,919
Net book value at 31 March 2020 1,149 180 843 2,172
9.
Debtors
2020/21
2019/20
Debtors 307 1,045
Prepayments 910 964
Accrued income 2,928 2,349
Enforcement nancial sanctions and cost awards 334 2,218
Other debtors 2 68
10.
Cash and investments held
Cash Deposits Total Cash Deposits Total
2021 2021 2021
£’000 £’000 £’000
Actuarial Case Costs Fund — 2,000 2,000
— 2,000 2,000
Corporate Reporting Review
Legal Costs Fund — 2,000 2,000
— 2,000 2,000
General accounts
15,579 (4,000) 11,579 16,037 (4,000) 12,037
Totals at 31st March 2021 15,579 0 15,579 16,037 0 16,037
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11.
Creditors – amounts falling due within one year
2020/21
2019/20
£’000
£’000
Trade creditors 125 411
Other taxation and social security 961 760
Accruals 2,987 1,783
Deferred income 910 940
Deferred lease incentive 346 345
Enforcement nancial sanctions and cost awards 334 2,219
Corporation Tax 0 7
Other payables 206 354
12.
Creditors – amounts falling due after more than one year
2020/21
2019/20
£’000
£’000
Deferred lease incentive 1,010 1,357
13.
Signicant transactions with other standard setters
With the agreement of HM Treasury, BEIS and the FCA, the FRC has, since 2008, taken the responsibility for
collecting the UK contribution to the IASB alongside its preparer’s levy. The FRC makes a small charge for providing
this service. The amount of monies collected during the year was £862,000 (2019/20: £866,000), of which £26,000
(2019/20: £54,000) remained to be paid over by the FRC to the IASB as at 31 March 2021.
14.
Provisions for liabilities
2020/21
2019/20
£’000
£’000
Leasehold improvements and dilapidations
Balance at 1 April 2020 263 231
Amount charged to/(released from)prot and loss account 34 32
Balance at 31 March 2021 297 263
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15.
Commitments
Total commitments for the FRC under operating leases relating to the leasehold property were as follows:
2020/21
2019/20
Total
Total
£’000
£’000
Payments due within one year 816 815
Payments due within two to ve years 2,475 3,282
Payments due after more than ve years
—
0
Total commitments for the FRC under operating leases for oce equipment were as follows:
2020/21
2019/20
£’000
£’000
Payments due within one year 3 3
Payments due within two to ve years
—
0
Payments due after more than ve years —
—
16.
Related party transactions
The FRC is a public body operating under a remit letter from BEIS.
Transactions with related parties
Any related party transactions arise in the normal course of business and are not material.
Total key management personnel compensation
2020/21
2019/20
£’000
£’000
Key management personnel
Fees & sta costs 1,313 2,149
Other pension costs 97 60
1,410
2,209
Social security costs 169 251
This includes all Board members and Executive Directors’ costs.
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17.
Subsidiary undertaking
The FRC has one subsidiary undertaking, UK Accounting Standards Endorsement Board Ltd , formerly UK
Endorsement Board Ltd. It is a company limited by guarantee of which the FRC is the sole member. Its registered
oce is 8th Floor 125 London Wall, London, United Kingdom, EC2Y 5AS. It did not trade during the reporting
period.
18.
Liability of members
The members of the FRC have undertaken to contribute a sum not exceeding £1 each to meet the liabilities of the
Company if it should be wound up.
19.
Events after the end of the reporting period
The Financial Statements were authorised for issue by the Accounting Ocer on the date they were certied for
and on behalf of the Comptroller and Auditor General.
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Appendices
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Appendix 1
Abbreviations
Acronym Name in full
ACCA Association of Chartered Certied Accountants
AEP Audit Enforcement Procedure
AIA Association of International Accountants
AIM Alternative Investment Market
APS Actuarial Profession Standards
ARAC BEIS Partner Bodies Audit and Risk Assurance Committee
ARGA Audit, Reporting and Governance Authority
BAME Black, Asian and Minority Ethnic
BEIS Department for Business, Energy and Industrial Strategy
C&AG Comptroller and Auditor General
CAI Institute of Chartered Accountants in Ireland
CCAB Consultative Committee of Accountancy Bodies
CEO Chief Executive Ocer
CFO Chief Financial Ocer
CIMA Chartered Institute of Management Accountants
CIPFA Chartered Institute of Public Finance and Accountancy
CMA Competition and Markets Authority
CPD Continuing Professional Development
EEA European Economic Area
EFRAG European Financial Reporting Advisory Group
EU European Union
FCA Financial Conduct Authority
FRS Financial Reporting Standard
GDPR General Data Protection Regulation
GIAA Government Internal Audit Agency
IAASB International Auditing and Assurance Standards Board
IASB International Accounting Standards Board
ICAEW Institute of Chartered Accountants in England and Wales
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Acronym Name in full
ICAS Institute of Chartered Accountants of Scotland
IESBA International Ethics Standards Board for Accountants
IFIAR International Forum of Independent Audit Regulators
IFoA Institute and Faculty of Actuaries
IFRS International Financial Reporting Standards
ISA International Standards on Auditing
ISAs (UK) International Standards on Auditing (UK)
JFAR Joint Forum on Actuarial Regulation
KPIs Key performance indicators
LAAA Local Audit and Accountability Act 2014
MoU Memorandum of Understanding
NAO National Audit Oce
NHS National Health Service
PIEs Public Interest Entities
PRA Prudential Regulation Authority
PSAA Public Sector Audit Appointments
QAS Quality Assurance Scheme
RQBs Recognised Qualifying Body
RSB Registered Supervisory Body
SASB Sustainability Accounting Standards Board
SATCAR Statutory Auditor and Third Country Auditor Regulations
SORP Statement of Recommended Practice
SoS Secretary of State
TAS Technical Actuarial Standard
TCA Third Country Auditor
TEG Technical Experts Group
UK GAAP United Kingdom Generally Accepted Accounting Practice
XBRL eXtensible Business Reporting Language
CCS0421402642
ISBN 978-1-5286-2564-7
The FRC does not accept any liability to any party for any loss, damage or costs however
arising, whether directly or indirectly, whether in contract, tort or otherwise from action
or decision taken (or not taken) as a result of any person relying on or otherwise using
this document or arising from any omission from it.
© The Financial Reporting Council Limited 2021
The Financial Reporting Council Limited is a company limited by guarantee.
Registered in England number 2486368.
Registered Oce: 8th Floor, 125 London Wall, London EC2Y 5AS
Financial
Reporting Council
8th Floor
125 London Wall
London EC2Y 5AS
+44 (0)20 7492 2300
www.frc.org.uk