The UK's audit regulator, the Financial Reporting Council, has confirmed it is making inquiries into accounting irregularities at Manchester City, taking over regulatory consideration of the case from the Institute of Chartered Accountants in England and Wales on 30 September.
In a letter to the House of Commons business select committee, the FRC said no formal investigation had started, but it was making inquiries into the case. The move follows an independent commission's finding that Manchester City breached Premier League financial regulations between the 2009-10 and 2017-18 seasons, including by artificially inflating the club's financial position by more than £900m. City are appealing against that verdict.
The FRC has greater resources and greater powers to apply sanctions than the ICAEW if it finds evidence of violations. It can examine whether BDO, Manchester City's auditors, conducted their audit in line with the rules, and can apply sanctions to individuals such as directors or employees of the club if they are members of professional accountancy bodies. BDO is the UK's fifth-biggest accounting firm and says it is a market leader in football.
The independent commission found that Manchester City gave a "misleading impression" of the scheme used to disguise the origin of shareholder funds injected into the club, and that its auditors were "unaware" of the scheme.
Manchester City said it will appeal, arguing the commission's decision contains "material errors, of law, principle and fact and is unsafe".
Liam Byrne, chair of the business select committee, wrote on X that the regulator's letter "exposes gaps in its ability to compel evidence from the club and pursue directors who fall outside its disciplinary rules", adding that this "raises serious questions about the powers available to hold companies and directors to account" and that the government must explain why reforms to close those gaps were abandoned.
BDO declined to comment.
Analysis
Why This Matters
- The FRC inquiry could lead to formal sanctions against Manchester City, its directors, or auditors BDO, going beyond the Premier League's own disciplinary process.
- It tests whether UK audit regulation can reach football clubs, which the FRC does not routinely oversee.
- The case follows a major breaches verdict and could shape how club finances are scrutinised across English football.
Background
The FRC regulates auditors and accountants in the UK, typically at larger institutions such as listed public companies, and football clubs have generally sat outside its oversight. The independent commission's verdict against Manchester City covered alleged breaches over nine seasons and found the club had inflated its financial position. City dispute the findings and have lodged an appeal. The FRC's involvement moves the dispute beyond sport's own rules into statutory regulation, where the regulator has stronger powers to compel evidence and impose sanctions.
Key Perspectives
Manchester City: The club argues the commission's verdict is unsafe and contains material errors of law, principle and fact, and has said it will appeal.
The Financial Reporting Council: The regulator has taken over regulatory consideration of the case and is making inquiries, but has not yet opened a formal investigation.
BDO: The club's auditor declined to comment. The commission found BDO was "unaware" of the scheme used to disguise the origin of shareholder funds, but the FRC can still examine whether the audit met the rules.
Liam Byrne and the business select committee: The committee chair says the regulator lacks the power to compel evidence from the club and to pursue directors outside its disciplinary rules, and is pressing the government to explain why reforms were abandoned.
What to Watch
- Whether the FRC escalates its inquiries into a formal investigation with the potential for sanctions.
- The outcome of Manchester City's appeal against the independent commission's verdict.
- Any government response to calls to strengthen the FRC's powers over clubs and directors.