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Guidance on the commencement of investigations (Accountancy Scheme)
Guidance on commencement of investigation of cases by the Financial Reporting Council
Disciplinary cases which will be dealt with by the FRC under the Accountancy Scheme
1The Financial Reporting Council (FRC) operates a scheme for investigating, and holding disciplinary hearings in relation to, allegations of misconduct by accountants and accountancy firms in the course of his or its professional activities or otherwise, who are members of one of the Participant professional bodies (Accountancy Scheme).
2The Accountancy Scheme only applies to those cases which, in the opinion of the Board raise or appear to raise important issues affecting the public interest in the United Kingdom. All other cases are dealt with by the Participant body to which the accountant or firm belongs.
3In deciding whether a matter raises or appears to raise important issues affecting the public interest in the United Kingdom, the Board considers:
- whether the matter appears to give rise to:
- serious public concern; or
- damage to public confidence in the accountancy profession in the United Kingdom; and
- all the circumstances of the case, including, but not limited to, its:
- nature;
- extent;
- scale; and
- gravity.
4In considering the extent, scale and gravity of the case, factors the Board is likely to take into account will include whether the alleged misconduct:
- adversely affected a significant number of people in the United Kingdom (such as investors, customers, employees, pensioners or creditors);
- involved or caused the loss or potential loss of significant sums of money (typically, more than £10 million); or
- could undermine confidence in financial reporting or corporate governance in the United Kingdom.
5These factors may be more likely to occur where the alleged misconduct concerns a body in which there is a public interest, such as:
- a United Kingdom publicly traded company;
- a significant financial institution, insurance undertaking or pension fund in the United Kingdom;
- a United Kingdom public body;
- a major audit firm;
- a significant United Kingdom charity; or
- a provider of energy, water, telecommunications or other utilities to a significant number of customers in the United Kingdom.
6It should be emphasised that the above list is not exhaustive. Other factors may be considered in deciding whether a matter fulfils the public interest criterion so that it should be dealt with by the FRC. Nor is any one factor or combination of factors necessarily determinative. Each case will be considered in the light of all the relevant circumstances.
7Where the Board is satisfied that a matter does raise or appear to raise important issues affecting the public interest, it must then decide whether there are reasonable grounds to suspect that the conduct of the Member or Member Firm:
- has fallen significantly short of the standards reasonably to be expected of a Member or Member Firm; or
- has brought, or is likely to bring, discredit to the Member or Member Firm or to the accountancy profession.
8In considering whether there are reasonable grounds to suspect that there may have been misconduct, regard shall be had to:
- any law, whether statutory or otherwise;
- any regulation of any sort;
- any charter, bye-law, rule, regulation or guidance.
9Where the Board is of the opinion that the criteria are met, the matter will be dealt with by the FRC in accordance with the Scheme.
Issued by the Conduct Committee of the Financial Reporting Council in July 2013 and revised by the Board with effect from 1 January 2021
The FRC's mission 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. The FRC sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. We also represent UK interests in international standard-setting. As the Competent Authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality.
The FRC (which includes the FRC's officers, employees and agents) does not accept any liability to any party for any loss, damage or costs howsoever arising, whether directly or indirectly, whether in contract, tort or otherwise from any 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.
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