Manchester City accounts face FRC scrutiny as regulator takes over enquiries
Manchester City’s financial reporting is facing scrutiny beyond football’s disciplinary process after the UK audit regulator took responsibility for enquiries into the preparation and auditing of the club’s accounts.
The Financial Reporting Council is assessing whether there are grounds for a formal investigation. That distinction is important: preliminary enquiries are under way, but they do not themselves amount to a finding of professional misconduct against the accountants involved.
According to Ellesheva Kissin’s report for the Financial Times, the intervention follows an independent commission’s findings that City overstated their financial position by more than £900 million. The club disputes those findings and has launched an appeal.
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FRC takes responsibility for Manchester City enquiries
FRC chair Dame Jayne-Anne Gadhia outlined the regulator’s position in a letter to Liam Byrne, chair of parliament’s business committee.
She said the watchdog was conducting “preliminary enquiries” to establish whether a formal investigation was justified. Responsibility had initially rested with the Institute of Chartered Accountants in England and Wales.
The FT reports that the FRC took over the enquiries the day after the commission’s findings were published. Its examination covers both the preparation of City’s financial statements and the audit work carried out by BDO.
The commission found that the club had used commercial arrangements to overstate income and conceal its financial position over nine years, according to the FT’s account.
Those are findings City is challenging. The FRC’s separate task is to assess their relevance to accounting and auditing standards, rather than determine sporting penalties.
City appeal does not prevent regulatory work
City’s appeal remains an important part of the picture, but the regulator has indicated that it does not have to wait for that process to finish before proceeding with its own work.
The appeal does not prevent the FRC from “pursuing our enquiries and any further activity”, the watchdog said.
That means two distinct processes can continue alongside one another. One concerns the disputed football commission findings; the other examines whether the conduct of accountants and auditors warrants regulatory action.
Neither process should be treated as a substitute for the other. The FRC’s involvement does not establish that BDO breached professional standards, nor does it determine the outcome of City’s appeal.
The immediate question is whether the material being reviewed provides sufficient grounds to move beyond preliminary enquiries.
BDO audit work comes under examination
BDO has audited Manchester City since 2007, according to the FT. The firm’s work is therefore a central part of the regulator’s review.
The report explains that the FRC can investigate the auditor and certain individuals involved in preparing the accounts, including directors or employees who belonged to a professional accountancy body at the relevant time.
If a formal investigation were opened and breaches established, potential sanctions could include fines or bans for accounting firms or individuals.
That does not mean such penalties have been proposed or imposed in this case. They describe the possible consequences of a process that has not yet reached that stage.
The FT reported that neither Manchester City nor BDO immediately responded to its requests for comment.
Regulatory limits prompt wider accountability questions
Gadhia’s letter also highlighted limits on the FRC’s authority.
City is not classified as a public interest entity, the category covering businesses such as listed companies, banks and insurers. According to the FT, that affects the regulator’s ability to compel information directly from the club.
Its powers also do not extend to pursuing company directors who are outside professional accountancy bodies.
Byrne argued that the letter exposed shortcomings in the current system.
“This raises serious questions about the powers available to hold companies and directors to account,” he said.
For football, the significance extends beyond the accounts of one club. The case raises questions about how financial reporting is checked and who can be held responsible when concerns emerge.
For now, the confirmed development is the FRC’s decision to take control of the enquiries. Whether that produces a formal investigation or subsequent sanctions remains unresolved.