One of the UK’s largest audit sector trade bodies has called on the UK’s new government to set out a “clear timetable” for its plans to overhaul the UK’s audit sector in claiming audit reform will play a vital role in securing long-term economic growth.
Writing to UK prime minister Liz Truss, business secretary Jacob Rees-Mogg, and chancellor of the exchequer Kwasi Kwarteng, the Chartered Institute of Internal Auditors (IIA) called on the government to continue pushing forwards with plans to overhaul the UK’s audit sector, by creating a new regulator, boosting accountability, and tackling the Big Four.
The audit sector trade body urged the new government to “remain committed” to reforming the audit sector – even as the country continues to grapple with the “immediate challenges” posed by the energy crisis and the war in Ukraine.
The industry body, which has more than 10,000 members across the UK and Ireland, argued audit reform will play a “critical” role in driving “long-term economic growth,” by ensuring the UK maintains its “enviable reputation” for good corporate governance.
The IIA said the “immediate challenges” currently facing the country further strengthen the need for reform as it argued “businesses and investors need high-quality, accurate and effective audits now more than ever to support them in navigating the storm.”
The body warned that previous corporate failures, including the collapses of BHS, Carillion, Thomas Cook, and Patisserie Valerie, have had a “major impact” on the UK economy in costing taxpayers millions and leading to the losses of thousands of jobs.
“Stronger governance and audit can help to prevent such collapses occurring, protecting jobs, pensions, investors, and incomes,” the IIA letter says.
The letter said IIA was “encouraged” by the previous government’s efforts to reform the UK’s audit sector – with a view to replacing the UK’s Financial Reporting Council (FRC) with a new, more powerful regulator, called ARGA – as it urged the new government continue with the reforms.
The IIA’s letter comes as Liz Truss has vowed to “usher in a decade of dynamism” and boost the UK’s long-term growth by cutting taxes, bringing in more immigrants, and loosening regulation around planning rules.
Atul Shah, a chartered accountant and professor at City University’s department of international politics, raised concerns Truss’s government may be tempted set aside plans to overhaul the UK’s audit sector in favour of a deregulatory stance towards the economy. He warned that any failure to reform the audit sector will hinder efforts to increase competition in the audit sector by strengthening the Big Four.
Bob Neate, deputy chair of audit at Mazars, said: “The need for the proposed reforms to audit and corporate governance detailed by the government in May 2022 remains as urgent as ever following the change in government. Effective and resilient audit is central to bringing trust to the capital markets: never more essential than in times of growth and change.”
A spokesperson for the Department for Business, Energy, and Industrial Strategy (BEIS) said: “The Government has already set out ambitious proposals to bring in a new, strengthened regulator and drive significant improvements to audit and corporate governance in the UK. The proposals balance the need for meaningful and effective reform with avoiding unnecessary costs and controls on responsible businesses.”