Withdrawal of Audit Reform and Corporate Governance Bill

This had been expected to make a broad slate of changes to the regulation of auditors and directors.  While some of the original aims of the reform had already been withdrawn, notably around competition and resilience in the audit market, other elements such as putting the FRC on a proper statutory footing, increasing accountability for directors and further measures intended to improve audit quality remained in the most recent proposals. The Government has now confirmed that it no longer intends to consult on the proposals and the Audit Reform and Corporate Governance Bill will not proceed.

While we recognise that the Government has pressing matters to deal with and limited parliamentary time available, we are disappointed that this important package of reforms, for which we have been waiting for some time, will no longer be proceeding this parliament.

The Government has noted that the need for major reform has decreased as audit quality and audit regulation have improved over the period since the reviews in 2019 and that it still expects to put the Financial Reporting Council on a proper statutory footing “as soon as parliamentary time allows”.  This will presumably eventually create the proposed Corporate Reporting Authority (previously proposed as the Audit, Reporting and Governance Authority;  ARGA) but the extent of any new powers and timing of this is not yet clear and any legislation is likely to be outside this parliamentary session.

Given this is a delay to a reform proposal rather than an action on regulation, we do not expect any direct impact on our clients or audits from this development.

We do note, however, that the government has proposed an ambitious set of reforms to simplify and reduce company reporting requirements under the “Modernising Corporate Reporting” project currently underway and look forward to working with the Department of Business and Trade on this as these plans move through early phases of consultation this year.