FRC chair Jan du Plessis

In his 2018 review of the Financial Reporting Council (FRC), John Kingman said the regulator should be ‘firmly focused on the interests of consumers of financial information, not producers’. So, is it a good thing that the FRC’s new chair, Jan du Plessis, is from the producers’ camp, most recently as chair of UK telecoms group BT?

No, it isn’t. But those with an investment background either fail to put themselves forward or do not have the ear of government. The appointment is, after all, made by the Department of Business, Energy and Industrial Strategy. Let’s hope, though, that du Plessis proves to be an excellent poacher turned gamekeeper – a process started many years ago when he switched from executive to non-executive roles.

Investors argue that companies that are well run, transparent and honest have a lower cost of capital – ie, they are trusted and so is the market. This fits the FRC’s purpose: 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.


Jane Fuller is a fellow of the CFA Society of the UK and senior fellow of the Centre for the Study of Financial Innovation

For this investment to pay off, supervision and enforcement need to deliver, corporate-style

The FRC is in transition towards becoming the Audit, Reporting and Governance Authority (Arga) in 2023. By then its headcount, compared with March 2020, will have more than doubled to about 500 and its budget will top £60m, according to the draft strategy, plan and budget 2022–25. For this investment to pay off, the biggest area of spending as well as the smallest – supervision and enforcement respectively – need to deliver, corporate-style.

These two are the tough side of the FRC’s four faces. Its traditional consensual approach lives on as ‘system partner’ and ‘facilitator’ – the other two faces. Supervision now involves more inspections of corporate reports and audits, and much closer monitoring of audit firms, including via the ISQM1 quality management standard. The chances of improving audit culture should be enhanced by operational separation from consultancy activities.

Oversight of audit committees is one of the places where du Plessis should apply his weight

An important new strand is oversight of audit committees, which users of accounts suspect have remained too close to management. This is one of the places where du Plessis should apply his weight. It is in the interest of non-executive directors, as well as every stakeholder, that financial information is complete and accurate. The same goes for rigorous assessment of risks stretching into the future, such as the impact of climate change.

His job will not be made easier by the government’s reluctance – under the ‘Restoring Trust’ agenda – to impose a UK-style Sarbanes-Oxley regime on companies’ internal controls or to empower the regulator to sanction directors as it can accountants. Instead, much will depend on companies’ audit and assurance policies and on the FRC/Arga working closely with other regulators to use all existing powers, including under listing and insolvency rules.

The appointment of du Plessis fits with the regulatory pendulum swinging away from tough legislative reforms. Arga was conceived in the wake of the Carillion and other accounting scandals, and amid plummeting audit-quality scores. It will have more powers and more resources than the FRC, but it must demonstrate that they are being used effectively.