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UK accounting watchdog to get 80 more 'teeth'

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LONDON (Reuters) – Britain’s accounting regulator launched its biggest recruitment drive on Wednesday to hire 80 more staff as it transforms into a more powerful body to improve audit quality.

The Financial Reporting Council (FRC) has been criticised by lawmakers for being “toothless” in its response to failures at retailer BHS and construction company Carillion, which collapsed with little warning to staff and investors.

A government-backed review said last December the FRC should be replaced with a more powerful Audit, Reporting and Governance Authority, or ARGA, that is not “excessively consensual” in treating EY, KPMG, Deloitte and PwC, the “Big Four” accountants that dominate audit.

It has begun responding faster, announcing a formal investigation into the auditor of Thomas Cook, a travel company that only collapsed last month. It is also taking a harder line on audit quality.

A new chair, Simon Dingemans, and new chief executive Jon Thompson took up the reins this month, but the formal name change to ARGA and other changes proposed in the government review must wait for legislation.

“The increase in staff is designed to meet the FRC’s increased supervisory responsibilities, including boosting the FRC’s enforcement and audit inspection teams,” the watchdog said in a statement.

The recruitment drive will take total headcount to 280.

The company collapses prompted the FRC last week to toughen up a rule that requires auditors to state whether they agree that a company is a “going concern”, meaning it is likely to stay in business for the coming 12 months and not suddenly crash.

(Reporting by Huw Jones; Editing by Nick Macfie)

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