Audit regulator looking into Manchester City accounting

The UK's audit regulator, the Financial Reporting Council, is investigating accounting irregularities at Manchester City. The regulator took over the case from the Institute of Chartered Accountants in England and Wales on September 30th. No formal investigation has begun, but the regulator is probing the situation. This comes after Manchester City was found guilty by an independent commission of all charges related to financial regulation breaches between 2009-10 and 2017-18, including artificially inflating the club's value by over £900m.

The club is appealing the verdict. The Financial Reporting Council, which typically oversees accounting standards for larger institutions like public companies, now has the resources and authority to apply sanctions for violations. The regulator can examine the actions of BDO, Manchester City's accounting firm, to determine if the audit adhered to rules.

It can also sanction individuals within the club if they are part of professional accountancy bodies. BDO is the UK's fifth-largest accounting firm but claims to be a leader in the football industry, advising more Premier League and Championship clubs than any other firm. The independent commission that investigated Manchester City found the club gave a misleading impression of a scheme used to conceal the source of funds from its auditors, who were unaware of the scheme.

Manchester City plans to appeal the commission's decision, claiming it contains material legal, principle, and factual errors. Liam Byrne, chair of the business select committee, has called for the Financial Reporting Council to have greater powers to investigate such cases, stating that the regulator's letter highlights gaps in its ability to compel evidence from the club and pursue directors outside its disciplinary rules.

Byrne questions why reforms to address these issues were abandoned and what measures the government will take to strengthen accountability.