COMMONS

Financial Conduct Authority Internal Audit Reports

29 March 2015

The Financial Conduct Authority has agreed to provide the Treasury Committee with copies of internal audit reports given to the FCA’s Audit Committee one year after the Audit Committee has received them (see attached correspondence).

Comments by Andrew Tyrie MP, Chairman of the Treasury Committee

"The FCA’s undertaking to publish copies of its internal audit reports is welcome. Still, obtaining it took many requests and a year’s persistent pressure from the Committee.

As we can see from both the Davis report and the Treasury Committee’s recently published report, the FCA have a lot of work to do.  The evidence from this episode suggests that there may be broader problems at the FCA, which range far wider than points of process and procedure. These include the FCA’s communication methods, possible poor working relationships between divisions, the Board’s effectiveness, and insufficient focus by its staff on the FCA’s objectives, among other things.

The publication of these internal audit reports will better enable Parliament and the public to follow the FCA’s progress in resolving these issues, and in increasing its effectiveness."

Background

During a session on 4 February 2014

The Chairman of the FCA, John Griffith-Jones, undertook to consider and respond to the request to share their internal audit reports with the Treasury Committee.

Q172 Chair: I think we would like all the information that is available. The FCA also does internal audit reports. Do those come directly to you Mr Griffiths-Jones? 

John Griffith-Jones: They do, or at least the executive summary comes to me and the full report goes to the audit committee that meets four times a year, on which I sit but I do not chair.

Q173 Chair: The Committee would be very grateful if we could see those henceforth.

John Griffith-Jones: Can I take a rain check on that one?

Chair: I think you can take a rain check on a discussion with me about whether any redactions may be necessary. But if you are telling me you want a rain check on whether they can be supplied to the Committee, I think there will be a major problem.

On 3 March 2014, the Chairman of the FCA wrote to Andrew Tyrie MP, Chairman of the Treasury Committee to turn down this request.

During a session on 9 September 2014

The issue was again raised with the Chairman of the FCA:

Q154 John Thurso: I will come to you first, Mr Griffith-Jones. All my questions are about the relationship between yourselves and this Committee—the co-operation with the Committee. There are three areas where we have asked for papers or asked to see things recently where, for one reason or another, you felt unable to comply. The first was over a request to see internal audit reports, the second was on some legal advice, and the third was relating to deals with banks. I will take you to those in turn and start with the internal audit reports: if we were to insist on seeing those, on what grounds would you resist us?

John Griffith-Jones: My understanding is that if you insist, you insist. As I said—I think in real time at the last hearing, and as I wrote to your Chairman subsequently—I beg you to consider the arguments about giving us a protected space in which to do our work, of which receiving reports about things that are not quite right, frankly, and putting it right is a wholly necessary part of every organisation’s function. If you shed a spotlight into that in real time, you alter the behaviour of the people in the protected space and make my job more difficult to do regulation work. That is my only reason. I completely understand that if something goes wrong, you hold us to account afterwards, and if you say, “Was there an internal audit report on this, and did you act on it?” that is completely for the public domain.

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