On 17 June 2016, the FRC became the 'competent authority' for audit in the UK1. We now enforce Audit requirements under the Audit Enforcement Procedure (AEP). We also continue to provide independent professional discipline by arrangement with the professional accountancy bodies and the Institute and Faculty of Actuaries, under the Accountancy and Actuarial Schemes (Schemes)
The AEP has an early administrative stage which provides opportunities to dispose of an enforcement matter without necessarily needing to go to a FRC Tribunal hearing – although that option is always available. The Schemes do not contain those initial (executive and committee) stages before a Tribunal hearing although settlement discussions can be entered into at any stage.
The FRC Tribunals which apply the AEP and the Schemes are composed of either three or five individuals drawn from a Panel of Tribunal members. Tribunals will always include a majority of non-accountants or actuaries. The Chair of every Tribunal will be a qualified lawyer of suitable experience. Every three person Tribunal will also include an accountant or actuary and a lay person. Every five person Tribunal will include at least one, but no more than two, accountants or actuaries, a lay person and a further lay or legally qualified person. To ensure their independence no member of a Tribunal may be an officer or employee of any of the professional bodies or of the FRC.
Tribunal hearings are normally be open to the public except in exceptional circumstances where the Tribunal decides that this would not be in the interests of justice. Normally, if the case is contested, the Tribunal will be presented with evidence in the case. Witnesses may be called and asked to give oral evidence. They may be cross-examined.
Tribunal hearings are similar to hearings in court but less formal and the Tribunal will not be subject to the same restrictions as a court might be in accepting evidence. The individual or firm against whom the complaint has been brought is entitled to attend and be legally represented at all hearings and will have the opportunity to defend any allegations made against them, to present evidence and to challenge evidence against them.
If the Tribunal makes an adverse finding, it can impose a number of sanctions or combination of sanctions, depending on the applicable procedure. The available sanctions are listed in the AEP and in an Appendix at the back of the Schemes. It can also order the individual or firm to pay all or part of the costs of the investigation and hearing. If the Tribunal dismisses the matter, it can order the FRC to pay all or part of the legal costs of the individual or firm concerned if it is satisfied that the FRC behaved unreasonably in bringing or pursuing the matter.
FRC Tribunals cannot order compensation to be paid to victims of the misconduct.
A respondent can seek leave to appeal against an adverse finding and/or order imposed by the Tribunal on certain grounds. If leave to appeal is granted, the Convener will appoint an Appeal Tribunal. Appeal Tribunals are constituted in the same way and subject to the same restrictions as Tribunals. An appeal is a review and not a rehearing.
1 Under the EU Audit Regulation and the Statutory Auditor and Third Country Auditor Regulations 2016 (implementing the EU Statutory Audit Directive 2014).
Appointments to the Tribunal Panels
Appointments to the Tribunal Panels are made by the independent Appointments Committee.