A cross-party group of Members of Parliament and Members of the House of Lords in the UK recently sent a letter to Prime Minister Rishi Sunak, urging the government to include the long-anticipated Audit Reform Bill in the forthcoming King's Speech on November 7th. The Bill was promised by the government over a year ago but has faced significant delays.
The reforms are needed to equip the UK's audit regulator, the Financial Reporting Council (FRC), with new legal powers to give it the teeth it needs to hold audit firms and company directors to account when there are corporate failures, the letter argues. "We are writing to express our strong support for the inclusion of the Audit Reform Bill in the forthcoming King's Speech," it reads. "This long-awaited legislation is vital to restoring trust in audit and corporate governance."
The cross-party letter, coordinated by the Chartered Institute of Internal Auditors, emphasizes the urgency of audit reform, citing high-profile corporate collapses such as Carillion, Patisserie Valerie, Thomas Cook, and Wilko. It also references recent findings by the FRC that a quarter of major company audits contained deficiencies.
The Parliamentarians asserted the importance of establishing a robust audit and corporate governance framework to manage risks effectively and promote investor interests. They stressed that the UK needs an audit regulator with statutory powers, which the FRC currently lacks and can only be implemented through primary legislation.
The letter points out that more than four years have passed since the Independent Review of the Financial Reporting Council, over three years since the Independent Review into the Quality and Effectiveness of Audit, and over one year since the government's commitment to publish a draft Audit Reform Bill. The authors expressed concern that further delays could harm businesses and the UK's reputation for corporate governance and investment.
Earlier this year, Starling Insights published "Renal Failure: A Crisis in Audit Culture?," a Deeper Dive report discussing the importance of audit quality to a well-functioning economy and society.