Audit reform is years away!

Audit reform legislation will not be brought before Parliament in this legislative period, and there is a growing worry that we will miss a once in a generation opportunity for real reform.

ICAEW CEO, Michael Izza, said the mention of audit reform in this Queen’s Speech is “doubly disappointing”. He felt the proposed scope of change is modest and misses the opportunity to address wider issues in corporate governance. “He explained: “This might well end up as the lop-sided reform we have consistently warned against.”

Izza is also worried about timing: “There seems to be no chance that this Bill will pass in the forthcoming Parliamentary session, and very little prospect of it doing so in the one after that.”

It all means we are years away from seeing new legislation on the statute book.

David Herbinet, Mazars Head of Audit & Assurance agreed: “Meaningful reforms to the UK’s audit market are supported by businesses and all market participants, yet after the news that only draft legislation will be proposed there is still no clear timeline for these widely-backed and long overdue measures.

“With continued inaction we risk wasting the opportunity to address issues which impact our whole society. The UK’s post-pandemic recovery, and the ability for our companies to flourish on the global stage, hinge on the effectiveness with which we support UK businesses with world class corporate governance and a resilient, competitive audit market.

“With each successive delay these proposals lose momentum. Meanwhile the audit market remains beset by the issues identified by the thorough and independent inquiries by the CMA, Brydon and Kingman. This latest delay, after four years of glacial progress, raises the very real prospect of eradicating a once in a generation opportunity once and for all. We call on the government to commit to a clear timeline to progress these draft proposals into legislation and to finally deliver the reform that the market so clearly needs.”

ACCA’s Mike Suffield stressed that the reforms needed is not just for audit, pointing out previous government proposals also included broader corporate governance arrangements and directors’ responsibilities.

Suffield said: “As always with policy, the devil will be in the detail when it is published, and we look forward to seeing more. In the meantime, we welcome this next step, especially with the overdue commitment on the part of the Government to put the proposed replacement for the FRC – the Audit, Reporting and Governance Authority – on a statutory footing.”