UK government ministers will set out their plans to reform regulation of the UK’s auditing industry within the coming weeks, after calls for an overhaul first emerged in 2018 in response to the collapse of UK construction contractor Carillion.
The proposals are currently being circulated and are set to be signed off imminently, according to government officials speaking to The Financial Times. However, the sources warned that implementation of the overhaul may face further delays, as there is no guarantee the rules will be included in the government’s next legislative programme.
Speaking to City A.M. a spokesperson for the Department for Business, Energy and Industrial Strategy (BEIS) said: “Our consultation set out wide-ranging proposals to improve governance, transparency and audit in our largest companies, including by strengthening the powers of the regulator, and we will publish our response in due course.”
The long-awaited plans to overhaul the UK’s audit watchdog, the Financial Reporting Council (FRC), and replace it with a new regulator, the Audit, Reporting and Governance Authority (ARGA), emerged in response to a series of scandals in the audit industry, surrounding the collapse of some of Britain’s major firms, including BHS in 2016 and Patisserie Valerie in 2019.
News that plans for the overhaul are imminent come after the High Court appointed officer in charge of Carillion’s liquidation filed a £1.3bn claim against KPMG, on behalf of Carillion’s creditors.
Speaking to City A.M auditors said they welcomed the government’s reforms. In a statement Andrew Walton, EY’s UK Head of Audit, said the reforms provide the UK with an opportunity to “build a stronger business ecosystem,” as he argued that reforms are needed to ensure the UK’s competitivity in the future.
Walton said: “The factors driving a need for corporate governance and audit reform have been clear for some time, and the publication of the Government’s consultation last year was a welcome step. It is vital that the Government maintains momentum behind the reforms.”
“The experience in the US shows the type of accountability reforms included in the consultation can build long-term value, improve trust and resilience, and ultimately reduce the cost of capital. This value increase far outweighs the cost of additional regulation,” Walton said.
Hemiome Hudson, Head of Audit, PwC UK, said: “We support a great many of the proposals the Government consulted on last year and look forward to them being published. The right package of reforms has the potential to increase confidence in UK business by improving standards for corporate governance, reporting and audit.”