Britain’s audit regulator is pushing back against the explosion in size of annual reports, warning the trend is consuming too much of directors’ valuable time.
Richard Moriarty, chief executive of the Financial Reporting Council, says the costs and expectations surrounding annual reports have steadily ballooned as companies devote increasing pages to environmental, social and governance issues such as sustainability.
The growth in report lengths has placed a significant burden on company directors, who must spend larger amounts of time wading through lengthy documents.
“We want boards to spend their time on entrepreneurial activity,” Moriarty said in an interview with the Daily Mail.
“The more they are in a defensive posture box-ticking, the less they are thinking about innovation and growth,” he added, making clear his concern about the practical cost to business leadership.
Moriarty also noted that oversized annual reports make it difficult for investors and creditors to track down information that is actually relevant to themselves.
The FRC chief confirmed he has been working with several prominent City figures, including well-known fund manager Nick Train, to directly tackle the problem of report bloat.
“It’s a long overdue conversation, and the way I put it is wouldn’t it be good if this were a once in a generation reset?” Moriarty said.
His push on report sizes sits slightly outside the FRC’s core role of ensuring auditors meet the standards required for the integrity of public markets, but Moriarty is determined to create regulation that promotes growth alongside rooting out bad actors.
Since taking the top job three years ago, the FRC has navigated major upheaval, including a series of high-profile corporate collapses such as Carillion, which severely damaged public confidence in the sector.
Those failures prompted a review by Sir John Kingman, who concluded the FRC was a “timid” watchdog that was not fit for purpose and recommended replacing it with an independent body known as the Audit, Reporting and Governance Authority.
Plans to establish that replacement body, alongside an audit reform bill, were ultimately shelved by Starmer’s government, leaving the FRC continuing in its existing form.
The watchdog continues to face ongoing challenges, including recent fines levied against Big Four accountancy firms, though Moriarty insists meaningful progress has been made in recent years.
“Audit quality in the UK has come a hell of a long way since that dark period of 2018,” he said, pointing to what he described as a complete breakdown of public trust in both the audit profession and its regulation at that time.
Moriarty argues that if the UK is serious about driving growth, the FRC must “help businesses and support responsible risk-taking” rather than creating an environment that stalls innovation and burdens company leadership with excessive compliance demands.