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Manchester City Accounting Under UK Audit Regulator Inquiry

The Financial Reporting Council has taken over the case, but no formal investigation has started, and the club is appealing a Premier League verdict

By AXY Business Desk ·

Manchester City Accounting Under UK Audit Regulator Inquiry

Key points

The UK's audit regulator has confirmed it is making inquiries into accounting irregularities at Manchester City. The case grows out of a Premier League verdict that the club is now appealing, and it has moved into a new arena that football has rarely faced.

The Financial Reporting Council, known as the FRC, told the House of Commons business select committee in a letter that it had taken over what it called "regulatory consideration" of the case on 30 September. The case had previously been handled by the Institute of Chartered Accountants in England and Wales, the professional body for accountants. The FRC said no formal investigation has started, but it is making inquiries.

That distinction matters. An inquiry is an early stage in which a regulator gathers information and decides whether there is a case to answer. A formal investigation comes later, with set procedures, and it is the point at which penalties become a real possibility. For now, the FRC has not announced any finding against Manchester City or anyone connected with it.

What the Premier League verdict found

The regulator's move follows a decision by an independent commission, which found Manchester City guilty of all charges relating to breaches of the Premier League's financial regulations. The breaches covered the 2009-10 to 2017-18 seasons. The commission found that the club had artificially inflated its financial position by more than £900m.

The Premier League brought the charges in 2023, alleging more than 100 breaches of its rules over several years. The rules are designed to limit how much clubs can lose over time and to control how owners and related parties can put money into them. Many clubs have been caught up in disputes about those rules, but few cases have reached a verdict of this scale.

The commission's central finding was about disclosure. It said the club gave a "misleading impression" of a scheme used to disguise the origin of shareholder funds injected into the club. The club's auditors were "unaware" of the scheme, the commission found.

That wording can be hard to parse, so it helps to break it down. Shareholder funds are money that owners put into a company, usually in return for shares or in the form of loans. If the true source of that money is hidden, a reader of the accounts cannot see who is really supporting the business, or how stable its finances are. The commission's finding is that the club, not its auditors, held the information that was kept out of view.

Manchester City have said they will appeal. The club argues that the commission's decision contains "material errors, of law, principle and fact and is unsafe". Until that appeal is decided, the verdict is not final, and the club's position is that it should not stand.

Why the FRC's role is different

The FRC is the UK's main body for setting and enforcing standards in accounting and audit. It routinely oversees large institutions, such as listed public companies, which are firms whose shares are traded on a stock exchange. It does not routinely oversee football clubs. That gap is the reason the regulator's involvement is notable.

The source material says the FRC has greater resources, and greater powers, to apply sanctions if it finds evidence of violations. In practical terms, that means it can ask questions, examine documents and bring formal proceedings in a way that a football body running its own rules cannot always do. The regulator's powers are set out in law, and they are backed by penalties that can include fines and bans for individuals who belong to professional accountancy bodies.

The FRC has two main routes. First, it can look into the conduct of the club's auditor, BDO, and ask whether the audit was carried out in line with the rules that govern audits. Second, it can apply sanctions to individuals, such as directors or employees of the Etihad club, if those individuals are members of professional accountancy bodies.

That second route has a built-in limit. It covers people who are accountants or members of accountancy bodies. A director who is not, or a senior figure who is not in the finance profession, may fall outside the regulator's disciplinary rules altogether. That point is central to the concerns raised in Parliament, which are described below.

The auditor at the centre of the case

BDO is the UK's fifth-biggest accounting firm. It says it is a market leader in football and advises more Premier League and Championship clubs than any other firm. An auditor's job is to examine a company's accounts and say whether they give a true and fair view of its finances. Auditors do not run a company. They rely on the information management gives them.

That is why the commission's finding matters so much. If an auditor was unaware of a scheme, the question becomes whether the auditor's work was adequate for the risks it faced, not whether it was complicit. The FRC is now positioned to test that question against the rules.

The source material does not say that BDO did anything wrong. It says the FRC can examine whether the audit was in line with the rules. Whether that examination leads to any finding is an open question. Analysts who follow audit regulation would expect it to turn on the records the auditors were given, what they were told by the club, and what they should reasonably have asked. Those are the points where an inquiry of this kind usually concentrates.

Calls for stronger powers

Liam Byrne, who chairs the business select committee, has called for greater powers for the FRC to look into similar cases. The committee is made up of MPs who scrutinise the work of government departments and related bodies, so its chair's views carry weight in how Parliament might respond.

Byrne wrote on X: "The regulator's letter exposes gaps in its ability to compel evidence from the club and pursue directors who fall outside its disciplinary rules." His concern has two parts. The first is practical. A regulator that cannot compel a club to hand over evidence may struggle to establish what happened. The second is about accountability. If directors who are not accountants sit outside the disciplinary system, some people with responsibility for a club's finances may be out of reach.

That concern goes beyond one club. If the FRC cannot compel evidence from a football club, or pursue directors who fall outside its rules, a future case could face the same limits. Byrne's call suggests that Parliament could examine whether the regulator needs new legal powers, though the source material does not say whether any such change has been proposed.

What to watch next

The FRC has not said when its inquiries will be completed, and it has not announced a formal investigation. Several things will shape what happens next.

The first is Manchester City's appeal against the commission's verdict. The club's challenge centres on the claim that the decision contains material errors. If the appeal succeeds in whole or in part, the basis for the regulator's inquiry could look different. If it fails, the findings will stand as the starting point for everything that follows.

The second is whether the FRC opens a formal investigation. That step would bring its full set of procedures and sanctions into play. It is also the point at which the regulator would have to set out what it is looking for and what evidence it has.

The third is whether the select committee pushes for changes in the law. Such a move would take time, and it would need the support of the government and Parliament. Byrne's remarks signal interest in that route, but they are not a proposal for legislation in themselves.

For supporters, the immediate effect is limited. The club remains a Premier League side, and the regulator has not made any finding against it. For people who work in accounting and audit, the case is a reminder that auditors rely heavily on what management discloses, and that the reach of any regulator depends on the powers the law gives it.

The case also raises a wider question about how football's finances are policed. Football has its own rules and its own commissions. An outside regulator with statutory powers would add a different kind of scrutiny. Whether that becomes a regular part of how clubs are checked will depend on what the FRC decides in the coming months, and on whether Parliament decides the current powers are enough.

Questions and answers

Is the Financial Reporting Council investigating Manchester City?

The FRC has confirmed it is making inquiries into accounting irregularities at Manchester City, but it has said no formal investigation has started. It took over the case from the Institute of Chartered Accountants in England and Wales on 30 September.

Why is an audit regulator involved in a Premier League case?

An independent commission found Manchester City guilty of breaches of Premier League financial regulations between 2009-10 and 2017-18. The FRC oversees accounting standards and can examine the club's auditor, BDO, and apply sanctions to certain accountants.

What happens next in the Manchester City case?

Manchester City are appealing the commission's verdict. The FRC could open a formal investigation, and the chair of the Commons business select committee has called for greater regulator powers.

Topics: Manchester City, Financial Reporting Council, Premier League, BDO, Accounting irregularities, Football finance, Liam Byrne

Sources: BBC Business

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