UK audit regulator begins inquiries into Manchester City accounting

The Financial Reporting Council is making inquiries into Manchester City accounting, BBC News reported on 20 October. The UK audit regulator took over consideration of the case from the Institute of Chartered Accountants in England and Wales on 30 September, according to an FRC letter described by the BBC. No formal FRC investigation has begun; the inquiries bring the case before a regulator with powers to examine accountants’ conduct and impose sanctions if violations are established.

The move follows an independent Premier League commission’s finding that City breached financial regulations across the 2009-10 to 2017-18 seasons, including by artificially inflating its financial position by more than £900m, the BBC reported. Manchester City is appealing that decision, saying it contains material errors of law, principle and fact and is unsafe. The commission’s findings are separate from the FRC’s inquiries.

What the FRC could examine

The regulator could also sanction directors or employees who belong to professional accountancy bodies if it finds evidence of violations, according to the BBC. Its published Accountancy Scheme says a formal investigation into a member or member firm requires a case that raises, or appears to raise, important UK public-interest issues and reasonable grounds to suspect misconduct. That threshold describes the regulator’s general process; the FRC has not opened a formal investigation in this case.

Liam Byrne calls for wider regulator powers

Liam Byrne, chair of the House of Commons business select committee, said the FRC’s letter exposed limits on its ability to compel evidence from the club and pursue directors outside its disciplinary rules. In remarks reported by the BBC, he called on the government to explain why reforms intended to close those gaps had been abandoned and what it would do to strengthen accountability.