Kwarteng shakes up audit watchdog board with slate of new directors

Kwasi Kwarteng, the business secretary, is continuing a shake-up of the UK’s audit watchdog with the appointment of four new directors as it prepares to become a statutory regulator.

Sky News has learnt that Mr Kwarteng will announce later on Tuesday that Angela Cha, Sir Ashley Fox, Clare Thompson and David Willis will become non-executive directors of the Financial Reporting Council (FRC).

The quartet will arrive weeks after Sir Jan du Plessis, the former BT Group chairman, was confirmed as the FRC’s new chair, and follows months of criticism about the watchdog’s own corporate governance.

Mr Kwarteng has spoken about audit reform being a priority for the government, though it has yet to formally deliver its response to a consultation on the future of audit regulation.

Government sources say their objective is to legislate and have the new Audit, Reporting and Governance Authority (ARGA) operational by about the spring of 2023.

As the body responsible for overseeing corporate governance standards in the boardrooms of Britain’s biggest companies, the FRC has been left embarrassed by its own leadership vacuum.

Simon Dingemans, its last chairman, decided to step down in 2020 after clashing with government officials over the extent of his outside business interests.

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Since then, Keith Skeoch, former co-chief executive of the asset management group now called abrdn, held the FRC chairmanship on an interim basis, but he also stepped down last year.

Ironically, the extension of his tenure took Mr Skeoch beyond the nine-year stint on the FRC board that the regulator regards as a ceiling on the independence of directors on corporate boards.

Notwithstanding the problems recruiting new non-executive directors, the FRC is now regarded as having competent executive management in the form of Sir Jon Thompson, the former boss of HM Revenue and Customs.

Two of the new non-executives to be announced formally on Tuesday – Ms Cha and Mr Willis – have a legal background, while Ms Thompson, the interim senior independent director at M&G, spent the bulk of her career at PricewaterhouseCoopers and its predecessor organisations.

Sky News revealed last month that Sir Ashley, a former Conservative MEP, was being lined up to join the FRC board.

In response to an enquiry from Sky News, Mr Kwarteng said: “These appointments, drawing together directors with a wide range of experience, put the FRC in a strong position, and I look forward to working with Sir Jan and his team as we bolster the quality of audit and governance across UK plc.”

The impetus for audit reform has been accelerated by a series of accounting scandals at major companies such as BHS, the department store chain, and Carillion, the construction group.

In recent years, the FRC has handed out tens of millions of pounds in fines to audit firms and professionals for failings in their work on the accounts of dozens of companies, including Patisserie Holdings and Autonomy Corporation, the software group.

The groundwork for the FRC’s abolition was laid by Sir John Kingman, the former Treasury mandarin, who proposed that ARGA should have much tougher powers.

A separate report by Sir Donald Brydon, a former chairman of Royal Mail Group and London Stock Exchange Group, demanded sweeping cultural and practical reforms to the audit industry.

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