UK ministers are reportedly considering limiting the powers of the country's long-awaited new accounting regulator — the Audit, Reporting and Governance Authority (Arga) — to balance regulatory oversight with economic growth, according to The Times.
Initially proposed in 2018 as a more powerful replacement for the Financial Reporting Council (FRC), Arga was expected to have broad authority to investigate company audits and pursue all directors for financial reporting failures, regardless of their qualifications. However, sources indicate that the revised bill will restrict Arga's ability to reprimand non-accountant directors to only “the most egregious financial reporting failures.”
Businesses have reportedly lobbied ministers for such reforms, fearing that broad regulatory powers would hold directors accountable for minor mistakes. A government insider told The Times that the revised bill is now more "balanced" to prevent Arga from pursuing directors for "honest mistakes as well as gross misconduct." The changes come amid Chancellor Rachel Reeves' push for regulators to prioritize economic growth.
In a contribution to Starling's 2022 Compendium, Sarah Rapson, Executive Director of Supervision at the FRC, 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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