30 August 2023

Darren Jones MP, Business and Trade Committee, has written to Kemi Badenoch MP, Secretary of State for Business and Trade, regarding audit reform. A number of stakeholders have also urged the government to be quicker in implementing its proposals for reform of the audit industry.

An annual audit is a statutory requirement for all listed and large companies. The purpose of the audit is to provide assurance to shareholders that the financial statements give a true and fair view of the company. Good audit, though, doesn’t just protect shareholders, but also employees, pension holders, suppliers, customers and the wider community. It serves the public interest by underpinning transparency and integrity in business.

There were several major reviews of how the audit industry works and how it might be improved. A consultation on these proposals closed in July 2021. The government published its response to the consultation accompanying its white paper on 31 May 2022.

Some of the key reforms include:

  • the creation of a new statutory regulator
  • expanding the scope of regulation to large private companies
  • inviting the current regulator (the Financial Reporting Council) to strengthen the UK corporate governance code
  • changing reporting requirements
  • accounts, rather than having to seek a court order, along with powers to publish summary findings following a review
  • giving the Audit, Reporting and Governance Authority (ARGA) powers to investigate and sanction directors for breaches of corporate reporting and audit-related duties
  • giving ARGA responsibility for registration of auditors within scope, and ask professional bodies to improve auditor qualifications, skills, and training
  • a package of measures intended to increase choice, improve resilience and enhance professional scepticism
  • a new statutory regime for the oversight of accountancy professional bodies and powers to investigate and sanction accountants.

You can read more on this topic, here.

In the letter, Darren Jones, said:

‘‘We were disappointed that space was not found for a bill this Session. We were heartened by the Government’s indication that a Draft Audit Reform Bill would be published; but there has been no sign so far of any draft bill, and the end of the Session is now only weeks away.

I reiterate the Committee’s strong support for legislation in this field, and I trust that you will be pressing for the inclusion of a full Audit Reform Bill in the King’s Speech in November.’’

Read the letter in full, here.

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