The UK is set to exclude a long-awaited overhaul of the country's audit and corporate governance regulations from its legislative priorities for the coming year. This expected omission from the King's Speech in November, which outlines the government's agenda for 2023-24, suggests that the reforms may be delayed until after the next general election.
The changes in legislation were initially promised after several large companies collapsed due to widespread accounting fraud that went undetected by auditors. However, the reforms have faced numerous delays. "There are some measures we can take using secondary legislation to implement some of the reforms," one government insider said. "We are still keen to do it — the government isn't backing off — but it's the usual question of parliamentary time."
The proposed reforms involve replacing the Financial Reporting Council (FRC) with a more robust regulatory body called the Audit, Reporting, and Governance Authority. Senior figures at the FRC have reportedly expressed frustration about the likelihood of further delays with the reforms. The absence of legislation has limited the FRC's ability to expand its role in overseeing company directors and promoting competition among auditing firms. When asked about the impact of repeated delays in introducing the reform legislation, acting FRC Chief Executive Sarah Rapson said, "There are areas where we are not able to make progress."
In a contribution to Starling's 2022 Compendium, Rapson, who then served as the FRC's Executive Director of Supervision, discussed the regulator's efforts to restore trust in the audit profession after a rash of high-profile scandals.
"At the heart of this change is a fundamental need to ensure that an audit firm has a purpose-led culture with the goal of assuring audit quality and maintaining trust in capital markets at its core," Rapson wrote. "A purpose-led culture, aligned to strategic objectives, is not just a requirement for corporations, but also vital for those firms that provide professional audit and assurance services to the large organisations that affect the wider health of the UK markets." ▸ Read More
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