The BEIS consultation on reforms to the audit sector is understood to be coming out “in the next couple of weeks”, and is expected to be extensive.
The consultation will contain detail on the minimum standards for audit committees, among other things that “UK PLC will gasp at”, Scott Knight, head of audit and assurance at BDO, told City A.M.
“I understand it’s coming in the next couple of weeks,” he said. “As I understand it the approach is to put the consultation out with everything in it, and go through the consultation and row back, rather than put a middle ground out there.
“It’s going to be a big consultation, really big.”
Kwasi Kwarteng, the UK’s new business secretary, is understood to have vowed to prioritise reforming the British audit market.
A BEIS spokesperson previously told City A.M: “Audit reform was a priority for the previous Secretary of State, and will continue to be so under the current Secretary of State.
“Strengthening our corporate governance and audit regime will help to ensure that the UK remains a world leader in corporate transparency and advance its status as a place of the highest standards in audit.
“The government has accepted the findings of three independent reviews into audit and corporate reporting, and is committed to acting on their recommendations. We will respond with comprehensive proposals for audit reform in due course and will then bring forward legislation when parliamentary time allows.”
The consultation will likely also contain information on the Audit, Reporting and Governance Authority (ARGA) replacing the current audit regulator, the Financial Reporting Council (FRC).
The FRC will eventually transition into ARGA, and is currently processing reforms to audit that can be implemented ahead of legislation.
In late 2018 the Kingman report recommended the FRC be replaced with ARGA. The report painted a damning picture of the FRC. It described the watchdog as “an institution constructed in a different era – a rather ramshackle house, cobbled together with all sorts of extensions over time” and “almost powerless” to address firm-wide issues of audit quality.
City A.M. has contacted BEIS for comment.