Bean counters are pushing for the Financial Reporting Council (FRC), the body that regulates accountants, to have powers over top executives following a series of high-profile corporate failures.
The FRC has come under fire on the back of the collapse of Carillion and BHS, insolvencies which sparked criticism of auditors from MPs.
Responding to a Government review of the FRC’s role and powers, the Press Association understands accountancy firms including Grant Thornton, BDO and Mazars have argued the regulator must be able to punish errant company bosses, as well as auditors.
Accountancy firms have argued that chief executives and finance directors play a central role in the auditing of companies, and should face heavy sanctions for botched audits.
It is understood that Grant Thornton believes the FRC should be able to fine directors who mislead auditors, and that fines should be related to the seriousness of the misconduct.
In its submission to the so-called Kingman review, accountancy firm BDO said the FRC had no authority over the majority of those responsible for good governance and financial reporting.
“In this, the FRC is like the director of a play with only a small number of the full cast of actors on the stage, taking directions from them,” BDO said.
“Currently, those actors taking direction comprise the corporate’s audit firm, accountants within that firm, and any individuals at the corporate who are accountants.
“They do not include, for example, the CEO of a company who is not an accountant. They do not include the CFO who is not an accountant.”
The accountancy firm suggested handing the FRC powers over directors of listed companies and firms which are of interest to the wider public.
The regulator could even sanction any advisers involved in corporate reporting, BDO said, including the surveyors responsible for valuing assets.
Accountancy firm Mazars has also proposed giving the FRC more clout in boardrooms, arguing it could play a broader role in corporate governance.
Mazars said regulators should scrutinise the governance of listed companies and large private companies, if there were cause for concern, and take action against irresponsible directors.
“This board should also have the ability to call for necessary improvements and, where necessary, to seek enforcement action against board members and not just, as at present, professional accountants and actuaries on boards,” Mazars said.
The Insolvency Service, part of the Government’s Business Department, is the regulator charged with investigating bosses when a company falls into administration, and disqualifying those found to be incapable of running companies.
However, the FRC has argued that executives must be on the hook for their role in the auditing, and not just the sound management, of their companies.
A spokesman for the FRC said: “The FRC and others have called for powers over all directors who are responsible for preparing financial statements, and not just members of accountancy bodies.”
The so-called Big Four accountancy firms – Deloitte, PwC, EY and KPMG – have been criticised by the FRC for an overall decline in audit inspection results.
They were also savaged by MPs earlier this year for “feasting on the carcass” of Carillion after collecting more than £70 million before its demise.