Latest news with #FinancialReportingCouncil
Times
20-05-2025
- Business
- Times
EY audit of NMC Health before its collapse was ‘deficient'
EY's audit of NMC Health before its collapse due to alleged internal fraud was 'deficient in multiple respects' and the failings 'extremely serious', according to an investigation by the accounting regulator. The provisional findings of a report by the Financial Reporting Council (FRC) were referenced in written submissions at the start of the High Court trial against EY, the Big Four accounting firm, on Monday by insolvency practitioners at Alvarez & Marsal, the administrators of NMC, a former FTSE 100 company. The administrators filed a claim against EY three years ago for breach of contract and duty of care, and negligence relating to EY's audit work for NMC between 2012 and 2018 and are seeking £2 billion. NMC has disclosed more than half a million
Yahoo
15-05-2025
- Business
- Yahoo
FRC report highlights key issues in NHS audit market
The Financial Reporting Council (FRC) has released a report on the NHS audit market, providing insights to aid the government's efforts in reforming the local audit system. The study, initiated in July 2024, responds to the challenges faced by NHS bodies in maintaining auditor relationships. The FRC's investigation into the audit market for NHS providers and Integrated Care Boards (ICBs) in England indicated that, although the market functions more effectively than that of local authorities, there are concerns that could threaten its future resilience. Three primary issues have been identified: limited capacity expansion among audit firms, problematic audit tender processes, and a misalignment of priorities between NHS bodies and audit firms. Audit firms currently serving NHS clients have expressed their capacity to continue but face significant barriers when attempting to scale their services. They have also highlighted difficulties with the tender processes for audits and a lack of early engagement with NHS bodies. This pre-bidding engagement is crucial for understanding the specific needs and expectations of each party. Furthermore, there seems to be a divergence in priorities. NHS bodies often focus on meeting audit deadlines and financial targets, which may come at the expense of the quality of accounts and audits. This misalignment could impact the overall effectiveness of the audit process. The FRC's report suggested a variety of potential remedies, both short-term and medium to long-term, that could be implemented as part of the government's broader local audit system reform programme. These recommendations aim to address the identified issues and bolster the audit market's resilience. FRC executive supervision director Sarah Rapson said: 'While we have not seen the same challenges as have been experienced with local authority financial reporting and audit, it is vital to address the issues in the audit market for NHS bodies to maintain its resilience. 'These findings and their potential remedies will help support the Government's wider reform programme for the local audit system, work which the FRC is also contributing to in our regulatory capacity.' "FRC report highlights key issues in NHS audit market" was originally created and published by The Accountant, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site.
Arab News
28-04-2025
- Business
- Arab News
Consulting scandals and how to avoid them
It was reported this month that Saudi Arabia's Public Investment Fund had suspended its involvement with the international consulting firm PwC. Last month, Britain's Financial Reporting Council fined the same company for reported audit failures. China has also recently imposed a hefty fine on it and temporarily suspended its operations because of similar failures. PwC, which is one of the so-called big four accounting companies, has reportedly shut down its operations in more than a dozen countries to prevent any repeats of the scandals that have surrounded its work. This came on top of a major retrenchment in recent years because many clients dropped the firm due to alleged questionable practices. This is just the tip of the iceberg and a correction is obviously needed. Major international consulting firms, such as the big four and the 'MBB' management consultancies, have come under scrutiny in recent years by governments, the media and clients. Courts have settled lawsuits against those companies, awarding significant damages — at times hundreds of millions of dollars — to the plaintiffs. In 2023, an Australian parliamentary committee investigated consulting contracts and found that government agencies were failing to comply with procurement rules or demonstrate value for taxpayer money from those contracts. It also found that there was a common practice of extensions of consulting contracts and cost overruns as a result. It accused the firms of an 'aggressive corporate sales culture.' The Australian government's contracts with the four firms in question averaged about $1 billion annually, although the current government has reduced that to about $600 million following these investigations. Major international consulting firms have come under scrutiny in recent years by governments, the media and clients Dr. Abdel Aziz Aluwaisheg Scandals also swirled around consultants during the COVID-19 crisis, including one related to the staggering expenses of more than £1 million ($1.3 million) per day on private consultants for the UK's 'test-and-trace' service and another about a firm advising both the US Food and Drug Administration and a pharmaceutical company it regulates. In France, there were accusations of fraud, tax evasion and shady political campaign work by a major consultancy firm. Some of the consultants were accused of poor quality of advice, leaking confidential information and not disclosing their conflicts of interest. They were also accused of overcharging through the practice known as 'land and expand,' which means pressuring clients to extend contracts or expand their scope. One of the most serious charges involved using bribery to land and continue contracts. Another critique is that consulting firms have lost their professional ethos. In his 2013 investigative book 'The Firm,' Duff McDonald argued that consulting has veered far from its traditional ethical standards, which were dedicated to advising clients in the public interest, to become a business focused on maximizing profit for its partners, leading to a slippery slope of scandals. Disclosing conflicts of interest should be a given, but some consultants have not been transparent with their clients, such as advising both regulators and the companies they regulate without telling the regulators of this conflict. Similarly, some consultants advise competing companies or rival states. Some of these ethical lapses and legal transgressions attributed to major companies are quite common throughout the consulting business, although the big firms are probably more prone to committing them for several reasons. Their operations are usually extended over many countries, making it difficult for senior management to exercise due diligence or prevent mistakes. Limited direct communications between senior-level staff at both ends, consultant and client, may lead to quality shortcuts and shortchanging clients in exchange for bribes or gifts. Disclosing confidential information is also more likely with big firms because the supply chain is usually long and porous. In all these cases, the absence of an effective counterpart team at the client's end to oversee the work of the consulting team usually leads to substandard products. Consulting companies, especially the larger ones, are held to a higher standard of professionalism and ethics than other lines of work. This is a good starting point; major consultant companies should lead on reinforcing professional and ethical standards for their profession. If they do not address the current backlash by taking corrective steps, the flight of their clients will likely continue, likely to other, smaller consulting concerns, with whose leadership they can build a more direct and personal relationship. In the final analysis, consulting companies are similar to other businesses in that they are only as good, efficient and honest as they have to be. If industry standards or regulations are not enforced, they will cut corners. And if the clients do not demand high-quality work, they probably will not get it. If clients do not closely supervise and meticulously review the consultants' work, the final product will suffer. Government agencies and businesses will continue to need consulting services for many purposes. They are more cost-effective than developing in-house expertise in all areas, which is extremely difficult when it comes to new areas such as harnessing the power of artificial intelligence or dealing with emerging financial threats or cyberattacks. They need to leverage the consulting firm's reputation, name and expertise to push forward any new policies. Disclosing conflicts of interest should be a given, but some consultants have not been transparent with their clients Dr. Abdel Aziz Aluwaisheg Consultants are also needed to develop new projects and ideas while allowing management to take credit for them. Conversely, there is a need to shift the blame to the consultant in case the agency has to be restructured or downsized. With that in mind, and if the consultancy business does not regulate itself, what should clients do to ensure that consultants adhere to agreements and deliver the desired product? How can clients protect themselves from shady practices? First, clear and detailed terms of reference must be agreed upfront, to help the consultant understand the client's needs and help the client measure compliance. Second, the client should establish a counterpart team to guide the consultants and ensure they are on the right track. Third, clients should use nondisclosure agreements to protect confidential or sensitive information. Fourth, clients should follow the news and avoid consultants known for shady practices. It would be useful to have a consultants' watchdog to report any infractions to. Fifth, governments need to strengthen their regulation of the consultancy business and hold those who breach the law accountable. Without these precautions, malpractice will continue in the race to maximize companies' profits and line the pockets of rogue consultants and unscrupulous officials.
Yahoo
16-04-2025
- Business
- Yahoo
FRC fines EY and audit partner for breaching audit rotation rules
UK's Financial Reporting Council (FRC) has sanctioned EY and its audit partner Christopher Voogd for breaches in the statutory audit of Stirling Water Seafield Finance (SWSF) for the year ended 31 December 2019. EY exceeded the ten-year limit for auditing a Public Interest Entity (PIE) without a public tender, breaching company law and the FRC's Revised Ethical Standard 2016, known as Mandatory Firm Rotation (MFR) requirements. Both EY and Voogd failed to follow proper procedures for continuing the audit engagement, contravening International Standards for Auditing (ISAs), the regulator said. EY has been fined £325,000 ($430,116.07), reduced from £500,000 for admitting to the breaches early in the proceedings. The company has also agreed to non-financial penalties including a severe reprimand and a root-cause analysis report, notes the FRC. Voogd has been fined £32,500, reduced from £50,000, and also received a non-financial sanction. FRC deputy executive counsel Jamie Symington said: 'Mandatory firm rotation is a clear requirement for auditors underpinned by company law and the FRC's Revised Ethical Standard. It is an integral legal safeguard to provide assurance that auditors are demonstrably independent which supports trust and confidence in UK corporate reporting and audit. 'In this case, there were significant failings in relation to mandatory firm rotation requirements at both the engagement and firm level during the continuance stage, which led to EY carrying out audit work despite being ineligible. It highlights the importance of the firm having adequate quality control standards under ISQC 1, as now succeeded by ISQM 1.' EY's internal policies were found inadequate in ensuring the firm's independence and compliance with engagement duration conditions. The firm has taken steps to prevent future breaches and will work with the FRC to implement further necessary actions. This incident follows a recent fine imposed on EY by the FRC for audit failures related to the collapsed travel company Thomas Cook for the financial years ending in 2017 and 2018. "FRC fines EY and audit partner for breaching audit rotation rules" was originally created and published by International Accounting Bulletin, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Sign in to access your portfolio
Yahoo
21-03-2025
- Business
- Yahoo
FRC unveils three-year strategy to fuel UK growth
UK's Financial Reporting Council (FRC) has published its Strategy for 2025-28 alongside its Annual Business Plan and Budget for 2025-26, following consultations with stakeholders. This marks the first three-year strategy to be introduced by the regulator since 2023. The refreshed strategy focuses on enhancing businesses' access to capital by ensuring a regulatory environment that maintains 'trust and confidence' in key areas such as audit, corporate reporting, and corporate governance. 'These are all critical factors for investors and other stakeholders who rely on them to thrive and grow, such as pension holders, suppliers and employees,' the regulator said in its press statement. One of the central themes of the strategy is improving the FRC's inspection and supervision of audit firms, as well as refining its approach to enforcement. The strategy also highlights several key projects, including a review of how the FRC conducts its inspections and supervision of audit firms. This includes evaluating its enforcement approach and holding auditors accountable when failings are identified. In addition, the FRC's Scalebox initiative, designed to support smaller firms in building capabilities, will expand to collaborate with audit firms and other entities to foster innovative approaches that drive growth and investment. The regulator has also committed to focusing on the audit market for small and medium-sized enterprises (SMEs), ensuring it serves their needs effectively. The strategy builds on the FRC's recent review of the UK Corporate Governance Code, which simplified guidance and unnecessary requirements, giving greater flexibility to Boards to comply or explain with the provisions of the Code. FRC chief executive Richard Moriarty said: 'If the FRC as a regulator is to encourage economic growth and investment, I believe it is important we support responsible risk-taking, not seek to eliminate it. 'Our strategy puts this principle at its heart whilst ensuring we continue to encourage high standards in corporate governance, reporting and audit, which are vital foundations for businesses in accessing capital and broader stakeholder support to thrive.' The new strategy also comes as the FRC prepares for upcoming draft legislation to modernise its statutory powers, ensuring they remain "fit" for purpose beyond 2028. The FRC added that it will also work closely with the Department for Business and Trade to align with the government's action plan for regulation, which aims to strengthen accountability through formal performance reviews. "FRC unveils three-year strategy to fuel UK growth" was originally created and published by The Accountant, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Sign in to access your portfolio
