The key facts
- The FRC took over a 'regulatory case review' from ICAEW on 30 September; a formal investigation has not yet begun
- The Premier League commission found City guilty of overstating its financial position by more than £900m; the club is appealing the verdict
- Business and Trade Committee chair Liam Byrne called for expanding the FRC's powers
Regulator takes the case under its control
The UK audit regulator — the Financial Reporting Council (FRC) — has confirmed it is investigating accounting breaches at Manchester City. According to the regulator's letter to the House of Commons Business and Trade Committee, the FRC took over a 'regulatory case review' from the Institute of Chartered Accountants in England and Wales (ICAEW) on 30 September. A formal investigation has not yet begun, but enquiries in the case are ongoing.
Context: the commission's verdict
The regulator's investigation follows the decision of an independent commission that found Manchester City guilty on all counts of breaching Premier League financial rules in seasons from 2009-10 to 2017-18, including artificially overstating the club's financial position by more than £900m. The club is appealing the verdict, stating that the decision contains 'substantial errors — of law, of principle and of fact — and is unreliable'.
The FRC's powers and BDO's role
The FRC has greater resources and sanctioning powers than ICAEW. The regulator normally oversees the accounting of large organisations, such as public companies, but not football clubs. The FRC can review the work of BDO — Manchester City's auditor — for compliance of the audit with the rules, and can also sanction individuals — directors or employees of the club — if they are members of professional accountancy bodies. BDO is the fifth-largest audit firm in the UK and, according to its own statements, is the market leader in football, advising more Premier League and Championship clubs than any other firm. BDO declined to comment.
The commission's findings about the auditor
According to the independent commission, Manchester City created a 'misleading impression' about the scheme to conceal the origin of equity funds invested in the club from its auditors, who were 'unaware' of the scheme.
Call to expand powers
Business and Trade Committee chair Liam Byrne called for giving the FRC greater powers to consider cases of this kind. On X he wrote that the regulator's letter 'exposes gaps in its ability to compel evidence from the club and pursue directors who fall outside its disciplinary rules', and that this 'raises serious questions about the powers to hold companies and directors to account'. In his words, the government must explain why reforms to close these gaps were scrapped and what will be done to strengthen accountability.
Image source, Getty Images 
