UK Audit Regulator Investigates Manchester City's Accounting

The UK's audit watchdog, the Financial Reporting Council (FRC), has confirmed it is leading inquiries into alleged accounting issues at Manchester City. The FRC took over the "regulatory consideration" of the matter on September 30th. While no formal investigation has begun, the FRC is actively looking into the case.

This development follows an independent commission's finding that Manchester City breached Premier League financial rules across several seasons, from 2009-10 to 2017-18. The commission cited artificially inflated financial figures, exceeding £900 million, as part of the breaches. Manchester City is appealing this verdict.

The FRC possesses greater resources and powers than previous bodies to impose sanctions if violations are found. While the FRC typically oversees accounting standards for publicly listed companies, its purview is now extending to football clubs in this instance.

The FRC's scope includes examining the conduct of BDO, Manchester City's auditors, to determine if their audit practices aligned with regulations. The council can also impose sanctions on individuals, such as directors or employees of the club, provided they are members of professional accountancy bodies.

BDO, the fifth-largest accounting firm in the UK, positions itself as a leader in the football sector, advising more Premier League and Championship clubs than any other firm.

The independent commission noted that Manchester City presented a "misleading impression" of the methods used to disguise the source of shareholder funds injected into the club. Auditors, according to the commission, were "unaware" of these methods.

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

Liam Byrne, chair of the business select committee, has called for enhanced powers for the FRC to handle similar cases. He highlighted on X (formerly Twitter) that the regulator's letter revealed limitations in its ability to compel evidence from clubs and pursue directors who operate outside its disciplinary frameworks. Byrne stressed that this raises significant questions about the existing accountability mechanisms for companies and directors and questioned why proposed reforms to address these gaps were abandoned.

BDO has declined to comment on the matter.