The Financial Reporting Council (FRC) took over “regulatory consideration” of Manchester City’s accounts from the Institute of Chartered Accountants in England and Wales (ICAEW) on 30 September, according to a letter the regulator sent to a Commons committee. No formal investigation has yet been opened, but inquiries are underway.

That matters because the Premier League’s own process punishes the club, while the FRC’s remit cuts into the professional work that was supposed to catch the problem in the first place.

An independent commission found Manchester City guilty of breaches of the Premier League’s financial rules across nine seasons, from 2009-10 to 2017-18, including the artificial inflation of the club’s financial position by more than £900m. The judgment also described how the club’s auditors had been given a “misleading impression” over a scheme to obscure the source of shareholder funds. Manchester City contests the verdict, calling it one that contains “material errors of law, principle and fact and is unsafe”, and says it will appeal.

Reach the Premier League does not have

The club’s external auditor is BDO LLP, the UK’s fifth-largest accounting firm, which also advises more Premier League and Championship clubs than any other UK firm. The FRC can scrutinize BDO’s audit work for regulatory compliance and can also sanction individual club directors or employees who are members of professional accountancy bodies, something the Premier League has no power to do.

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In the letter made public this week, the FRC said it is “currently examining the published findings of the independent Disciplinary Commission insofar as they may relate, or be relevant, to the financial statements issued by MCFC and the statutory audits undertaken by MCFC’s external auditors, BDO LLP”.

The regulator stated it was looking to see whether the Premier League investigation gives it grounds to open its own formal probe. BDO has declined to comment on the matter.

Byrne questions how nine years slipped through audit

The handover came after Labour MP Liam Byrne, chair of the Commons Business, Culture and Sport Committee, formally wrote to the FRC chair asking how an alleged £900m misstatement could have run for the best part of a decade without being flagged by the external audit.

“The findings raise a fundamental question: How could the established system of audit and regulatory scrutiny fail to uncover alleged misstatements of such a scale over nine years?” Byrne wrote.

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“We are particularly concerned that these issues came to light through media reporting rather than the established audit and accounting process.”

Byrne also warned that the FRC’s own reply exposed “gaps in its ability to compel evidence from the club and pursue directors who fall outside its disciplinary rules.” The watchdog can go after accountants who hold a professional qualification; it has no automatic route to a club director who does not.

The FRC’s current “regulatory consideration” stage can either escalate into a formal investigation or close without action. The Premier League’s separate punishment hearing on the financial charges is yet to conclude.

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