Ministers are set to ditch plans to overhaul the UK’s audit regime due to concerns the government won’t have enough time to pass the changes in parliament.
The government has repeatedly pledged to the audit regime market after a series of high-profile accounting scandals, including the collapse of construction giant Carillion in 2018, which happened after auditors signed off its books.
KPMG was fined more than £14 million over misconduct on major work it carried out for Carillion.
In other instances, the UK’s regulators issued a £2m fine against Deloitte for its audit of Mitie Group and a £2.3m fine against Grant Thornton over its audit of Patisserie Valerie.
Legislation was due to be introduced this autumn in the King’s Speech, where government lays out its planned legislation for the forthcoming session of parliament, but the plans are set to be dropped, the Financial Times has reported.
A government source told the Financial Times that “wholesale reform” was unlikely but there are “some measures we can take using secondary legislation to implement some of the reforms”.
He added: “We are still keen to do it — the government isn’t backing off — but it’s the usual question of parliamentary time.”
A government spokesperson told City A.M. that ministers remain “committed to improving audit and corporate governance in the UK”.
“Reform is already underway – the Financial Reporting Council has transformed the way it works, is consulting on changes to the Corporate Governance Code, and now has more powers to ban inadequate auditors from reviewing large companies’ accounts,” they added.
Under the planned shake-up, the accounting watchdog the Financial Reporting Council would be replaced with a more powerful regulator called the Audit, Reporting and Governance Authority, or ARGA.
Some 600 private firms would also be classed as “public interest entities”, resulting in tighter regulation under the plans.
Reform is already underway – the Financial Reporting Council has transformed the way it works, is consulting on changes to the Corporate Governance Code, and now has more powers to ban inadequate auditors from reviewing large companies’ accounts.
Government Spokesperson via City A.M.
