Question to the Department for Business, Energy and Industrial Strategy:

To ask Her Majesty's Government, further to the Written Answer by Lord Henley on 22 December 2017 (HL4283), what assessment they have made of (1) the sufficiency of the independence of the Financial Reporting Council from the accounting industry to monitor the provision of auditing services in accordance with the EU Audit Regulation, and (2) whether conflicts of interest are managed in a way that encourages confidence in audit quality.

The Government regularly reviews the governance arrangements of the Financial Reporting Council (FRC) prior to any additional delegation of the Secretary of State’s functions or as part of implementing regulatory changes. Most recently in preparation for the implementation of the new EU Audit Directive and Regulation, the Financial Reporting Council (FRC) made changes to make sure that its governance arrangements met the enhanced requirements of the new Directive and Regulation.

The FRC has implemented a number of the recommendations made by the Competition Commission in 2013 on the reporting of its audit inspection findings and has made other changes to improve the transparency of that process. These changes contribute to confidence in the quality of the audit regulatory system and therefore in the quality of the audits as a whole.