The Department for Business has announced its intention to publish a draft bill to revamp the UK audit regime and cut EU red tape.
Officials hope reforms will boost big business accountability and help British businesses operate with more agility and investment.
The move will reduce the risk of large companies collapsing, thus, increasing job security for British workers.
Previous corporate collapses have had a significantly negative impact on the economy. For example, the folding of Thomas Cook resulted in 9,000 redundancies, 555 retail store closures, and 1,286 companies and government entities being owed money.
On Tuesday morning, Business Minister, Lord Callahan, announced the intention to overhaul corporate reporting by implementing the new Audit, Reporting and Governance Authority (ARGA). By strengthening big British business accountability, the government believes the move will increase trust and investment, driving growth and job security.
ARGA will replace the Financial Reporting Council (FRC) and is expected to be a more robust regulator that will build stronger foundations for UK business.
The government has also announced plans to review broader reporting burdens on all businesses, including from retained EU law. This is designed to capitalise on ‘new found’ Brexit freedoms to achieve more proportionate regulation on British companies. These are plans which build upon the recommendations of an independent review by Sir John Kingman, Sir Donald Brydon, and the Competition and Markets Authority.
The Institute of Directors (IoD) welcomed today’s announcement and what it described as “long overdue” reforms. Dr Roger Barker, Director of Policy and Governance, praised “the establishment of a more effective audit regulator (ARGA).”
Andrew Harding, the Chief Executive of the Chartered Institute of Management Accountants (CIMA), also described the proposals “a step in the right direction” but warned that “external audit doesn’t operate in a vacuum”. Continuing he said, “It is part of the wider corporate governance and reporting framework that oversees large corporate entities. When it comes to the adoption of internal controls, which we have strongly advocated for in the past, we want to see such reforms applied consistently by the largest companies rather than on a comply or explain basis, as it seems to be proposed.”
Minister for Corporate Responsibility Lord Callanan explained, “collapses like Carillion have made it clear that audit needs to improve. These reforms will ensure the UK sets a global standard. By restoring confidence in audit and corporate reporting we will strengthen the foundations of UK plc.”