Tuesday 14 July 2020 12:01 am

Government dragging its feet on audit reform, says business committee

The business, energy and industrial strategy (BEIS) committee has accused the government of dragging its feet on proposed audit reforms. 

The government has today published its response to the committee’s inquiry into the collapse of Thomas Cook last year.

Read more: Grant Thornton fined £3m for ‘numerous’ audit failures

In the original findings from the inquiry last October, the committee expressed disappointment that the government had not moved forward with audit reforms. 

It called for the government to bring forward legislation to replace the Financial Reporting Council (FRC) with the Audit, Reporting and Governance Authority (Arga).

Today the government has said the creation of this new body “will follow as soon as Parliamentary time allows.”

Committee chair Darren Jones said: “Recent audit scandals highlight the need for the Government to tackle this issue as a matter of urgency. At a time when businesses are facing tough trading conditions and when their balance sheets are under significant pressure, it’s important investors and other stakeholders can have confidence in audits.”

Auditors have come under increased regulatory scrutiny in recent years, with corporate failures at Carillion, BHS and Patisserie Valerie. EY’s role in the high-profile collapse of German payments firm Wirecard, with the firm being accused of failing to carry out a standard audit procedure. 

Earlier this month the FRC ordered the Big Four accounting firms to separate their audit units from the rest of their businesses by 2024. 

Read more: ‘Utterly inadequate’: Experts slam watchdog’s Big Four audit split

Business secretary Alok Sharma, who appeared in front of the committee last week, failed to give a date for when legislation on audit reform would be brought forward.

“While the Government has a series of priorities at the moment, given the importance of audit and the fact the Department already has a raft of practical audit measures sitting on its desk gathering dust, we should expect the Business department to show far more urgency to help drive through the reforms needed on audit and on corporate governance,” Jones said.

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