Accounting scandals are becoming a real problem in the United Kingdom, and its government is looking to do something about it. The country's Financial Reporting Council's (FRC) inability to properly regulate accounting and audit firms has led to the creation of the Audit, Reporting and Governance Authority (ARGA), according to The Wall Street Journal (WSJ).
Announced on March 11, officials cited recent scandals were behind the push for the new regulator, notably the collapse of U.K. construction giant Carillion in January 2018. Moody's Investors Service previously reported reverse factoring accounting errors likely led to the collapse—an issue that occurs when a supplier sells discounted invoices to a bank and pays them at a later date, while suppliers get paid earlier.
Such issues could have been but were not predicted by the FRC, Business Secretary Greg Clark said in a statement.
"The government intends to move swiftly to implement these reforms and overhaul the sector," Clark states. "The U.K. has always been a world leader in audit and accounting services, with world-class frameworks for corporate reporting, corporate governance and regulatory oversight."
WSJ reported the FRC will continue accounting and auditing investigations during the implementation of the ARGA.
—Andrew Michaels, editorial associate