The FSA will force around 140 firms to hire auditors to conduct a skilled persons report in 2011/12.
The report, which can cost firms thousands of pounds, checks for weaknesses or failings in a firm’s practices and covers areas such as compliance, fraud, products and capital adequacy.
The FSA will finalise the number of firms involved at the end of March.
Under section 166 of the Financial Services and Markets Act, the FSA has the power to force a firm to appoint a skilled person to produce a report. That person must be independent to the firm and reports directly to the FSA.
The regulator uses the section to supervise firms and as an enforcement tool. It has not specified why it has chosen to invoke s166 for the 140 firms.
In a feedback statement published earlier this month, the FSA stated its intention to “increase the effectiveness of s166 SPRs as a supervisory tool”.
In 2009/10, the FSA ordered 88 s166 reports, costing firms a total of £24.8m, compared with 17 reports in 2005/06.
FSA auditing and accounting sector leader Richard Thorpe says: “We will continue to encourage regular dialogue between auditors and supervisors to increase the effectiveness with which auditors undertake their work and the effectiveness of supervision.”
Bill Warren Compliance managing director Bill Warren says: “With the FSA’s lack of resources to really get stuck into these issues, the use of s166, which is very expensive for individual firms, is an effective tool for the FSA.”