LONDON (Reuters) – Britain’s accounting watchdog on Thursday tightened fraud prevention standards in the wake of sharp criticism by parliamentarians after the high-profile collapses of companies such as retailer BHS and builder Carillion.
The Financial Reporting Council (FRC), criticised by lawmakers for being too timid in regulating auditors, said it wanted to increase clarity about an auditor’s obligations.
The revisions, effective for audits of periods beginning on or after 15 December, include more stringent requirements to identify and assess the risk of material misstatement because of fraud and the procedures to respond to those risks.
The FRC announcement comes amid a government-led plans to restore trust in audit and corporate governance.
This includes statutory requirements for directors to report on the steps they have taken to prevent and detect material fraud and for auditors to report in relation to such a director’s statement.
The FRC is undergoing an internal transformation to become the more powerful Audit, Reporting and Governance Authority or ARGA.
(Reporting by Kirstin Ridley, editing by Huw Jones)
