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Kingman in frame to lead audit watchdog probe

By Mark Kleinman, City Editor
Sir John Kingman, the former Treasury mandarin, is being lined up to lead a review of the Financial Reporting Council (FRC) that could shape the future of the embattled audit watchdog.
Sky News has learnt that‎ Greg Clark, the Business Secretary, has asked Sir John to oversee the inquiry, which follows controversy over the handling of probes into the collapses of high-profile companies such as Carillion.
Sir John is among a "small number" of names being considered to lead the review and could be announced in the coming days if he is approved by Downing Street, according to a City source.If he is appointed, it would underline the seriousness with which Mr Clark views the review of the FRC's funding, resources and regulatory powers‎.Sir John, who now chairs Legal & General, the FTSE-100 insurer, was a prominent figure in Whitehall for years.His career at the Treasury included a stint running UK Financial Investments, the agency set up to manage British taxpayers' stakes in banks partly or wholly nationalise‎d during the 2008 banking crisis.He later left to join Rothschild, the investment bank, before returning to the Treasury as second permanent secretary.Sources said the review of the FRC would be wide-ranging, and may lead to "uncomfortable conclusions" for Sir Win Bischoff, its chairman, and Stephen Haddrill, its chief executive.Sir John played a key role in installing ‎Sir Win as chairman of Lloyds Banking Group when it was part-owned by taxpayers in 2009.The FRC, which regulates the big four audit firms - Deloitte, EY, KPMG and PricewaterhouseCoopers - as well as their smaller peers and individuals who are qualified accountants, has been under intensifying pressure in recent months.Evidence which has emerged during a parliamentary inquiry into Carillion's descent into bankruptcy has sparked criticism both of KPMG, the company's auditor, and the regulator.In recent weeks, the FRC has said it is looking to pursue enforcement investigations into two former Carillion finance chiefs as well as the auditor on which investors relied for assurances about the construction firm's finances.
The FRC has also been targeted over its conclusion last year that KPMG should face no action over its auditing of HBOS, the mortgage lender which collapsed into Lloyds' arms in 2008.Appearing before MPs last month, Mr Clark said: "If you look back at the timeliness and record of some of the FRC's investigations, I know that the [select] committees have been questioning whether it could have been more prompt and more rigorous."Supporters of the FRC point to other factors in explaining some of its most protracted inquiries, including the period required to enable those criticised in official reports to respond.The accountancy watchdog has also on occasion delayed progressing investigations until those involving the Serious Fraud Office or other regulators have concluded.The FRC's defenders‎ also point out that judgements based entirely on hindsight do not provide grounds for regulatory sanctions.Critics of the way the audit profession is regulated suggest that the FRC's enforcement powers are too limited, and that it is too reliant on employing people with long careers at 'big four' firms behind them, leaving it exposed to conflicts of interest.In response to Mr Clark's comments last month, the FRC said the review of its work would provide "an opportunity to consider changing public expectations and whether our powers are adequate to meet those".Among the FRC‎'s other main duties is overseeing the UK's corporate governance code, which is in the process of being overhauled.The FRC declined to comment on Sir John's prospective appointment.
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But a spokesperson for the Department for Business, Energy and Industrial Strategy said: "The UK is admired around the world for its corporate governance regime and it's important to ensure all of our regulators continue to uphold those high standards."We intend to commission a review of the Financial Reporting Council's operations and will announce further details shortly."
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