Audit Regulator Probes Manchester City's Finances

The UK's audit regulator is now leading inquiries into alleged accounting irregularities at Manchester City. The Financial Reporting Council (FRC) confirmed it took over the case from the Institute of Chartered Accountants in England and Wales on September 30th. No formal investigation has begun, but the FRC is gathering information.

This development follows an independent commission's finding that Manchester City breached Premier League financial rules between the 2009-10 and 2017-18 seasons. The club allegedly inflated its financial position by over £900 million. Manchester City is appealing this verdict.

The FRC possesses greater resources and authority to impose sanctions if violations are uncovered. While the FRC typically oversees accounting standards for listed companies, its purview now extends to this football club case. The FRC can examine the conduct of BDO, Manchester City's auditors, to determine if their audits complied with regulations. Sanctions may also be applied to individuals, such as club directors or employees who are members of professional accountancy bodies.

BDO, the UK's fifth-largest accounting firm, positions itself as a leader in the football sector, working with more Premier League and Championship clubs than any other firm. The commission noted that the club presented a misleading picture of how shareholder funds were injected into the club to its auditors, who were reportedly unaware of the scheme.

Manchester City has stated its intention to appeal the commission's decision, citing "material errors, of law, principle and fact and is unsafe."

Liam Byrne, chair of the business select committee, has called for expanded FRC powers to handle similar cases. He pointed out that the regulator's letter highlighted weaknesses in its ability to compel evidence from clubs and pursue directors outside its disciplinary scope. Byrne emphasized the government's role in explaining why proposed reforms to address these gaps were dropped and what steps will now be taken to enhance accountability.

BDO has declined to comment on the matter.