The UK’s governance regulator should have new powers to demand information from firms under investigation, according to the candidate for chair of the organisation’s watchdog.

Dame Jayne-Anne Gadhia, named as the new chair of the Financial Reporting Council (FRC), made the comments this week during pre-appointment questioning by the House of Commons business and trade committee.

Gadhia said the powers should come as part of placing the FRC on a statutory footing, a measure first recommended by the Kingman Review in 2018, which looked at issues highlighted by the collapse of Carillion.

Committee chair Liam Byrne noted that the FRC does not currently have powers to require the sharing of information from companies under review.

Gadhia said: “I think it’s important as we look into important events that we get access to full information, where possible of course.”

Information powers and “required” funding from regulated firms, rather than the current voluntary payments, would form the centrepiece of any new statutory footing for the FRC.

In January, the government revealed it was ending efforts to push through further audit reforms but added it would “still look to put the Financial Reporting Council on a proper statutory footing, as soon as parliamentary time allows”. Currently, there is no indication when that might be.

Gadhia told the committee that the statutory footing was one of her priorities and she seek to persuade government to bring forward the necessary legislation. She was pushed several times to explain how she might galvanise action inside Whitehall.

“I mean, I don’t know that I can make sure of it,” said Gadhia, “but I shall certainly be making sure that as I speak with ministers and civil servants—and people that can achieve that—that they understand how important that is. I think they know how important that is.”

The FRC and its work regulating auditors and company directors came under intense scrutiny after the collapse of Carillion. Many of the recommendations made by the Kingman were acted upon by the FRC without the need for legislation.

The biggest—statutory footing, and new powers over company directors who are not accountants—remain unresolved.

Audit failure

Gadhia, who trained as an accountant at the beginning of her career, had a warning that despite changes and improvements to auditing, she didn’t think all company collapses and all audit failures could be stopped. She questioned whether Carillion was an audit failure.

“Of course, we should try and prevent audit failure. But was it really an audit failure that was at the heart of it? I think we’ll find that the accounting department and the business itself created the information that was presented to the auditors.”

She added that KPMG, Carillion’s auditors, had “really learnt the lesson from that” and “have taken a massive step forward”.

The committee questioned Gadhia on her time commitments in other roles and whether it would allow her to be on hand to do the work at the FRC, particularly when emergencies were breaking.

Gadhia said tools such as Zoom or Teams are “so important these days” to give her “a much more stretched timeframe in terms of the hours that you can give.

“So, I’ll always be there when I need to be there, either in person, which is always my preference, or online if needs be.”