According to a report from the Financial Times (FT), recently appointed UK business secretary Kwasi Kwarteng intends to publish a white paper on audit reforms as early as next week.
The white paper will follow numerous reviews into the UK audit market, most recently the Brydon report which called for the UK’s Financial Reporting Council (FRC) to transition into a new regulator, the Audit, Reporting and Governance Authority (ARGA).
The FT reported that the white-paper will push forward with many of the major recommendations from the independent reviews into the audit market, with the exception of the Competitions and Market Authority’s (CMA) recommendation that listed companies should have to enlist the services of two auditors to carry out a joint audit. The department for Business, Energy and Industrial Strategy (BEIS) is instead expected to propose a ‘more limited plan for a “managed shared audit” for all FTSE 350 companies’, according to the FT.
The FT also reports that directors of companies, rather than boards, will be held responsible for the accuracy of the company’s financial statements and could face fines and temporary bans if they are found to have breached their duties.
A UK Government spokesperson said: “Strengthening our corporate governance and audit regime will help to ensure that the UK remains a world leader in corporate transparency and advance its status as a place of the highest standards in audit.
“The Government has accepted the findings of three independent reviews into audit and corporate reporting, and is committed to acting on their recommendations.
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“The new Business Secretary has been clear that audit reform is a priority for the Department and we will publish comprehensive proposals shortly.”
Association of Chartered Certified Accountants executive director – governance Maggie McGhee said: ‘Audit reform has long been on the government’s agenda and we await the next steps with keen interest. Speculation about reforms has been growing in recent weeks, and what the audit market, business and indeed directors need is certainty and clarity about what reform means in reality. This has been our consistent message in recent reviews – including Kingman, Brydon and the CMA.’
The Accountant has approached various governing bodies and other stakeholders for comment and will update this article as appropriate.