The Department for Business, Energy and Industrial Strategy (BEIS) is consulting on wide ranging proposals for reforming audit and corporate governance. The proposals are based on a number of inquiries that have been conducted in recent years including the Kingsman review of the FRC, Sir Donald Brydon’s review audit quality and effectiveness and the Competition and Markets Authority study of the audit market.
These inquiries produced a total of 151 recommendations for improving audit and corporate governance. The current BEIS consultation, “Restoring trust in audit and corporate governance”, combines the extensive recommendations into a single set of proposed changes.
You can find out more about the proposals and how they may affect you and your business by downloading our summary document. We have explained each of the 11 sections of the consultation.
Get the summary
Taking part in the BEIS consultation on restoring trust
The BEIS consultation is closed on 8 July 2021. We responded to the consultation giving our position on the proposals.
Our position on ‘Restoring trust in audit and corporate governance’
We welcome this initiative and the opportunity to implement meaningful change. We believe the right and proportionate reforms will enhance the UK’s position as a world-class destination for investors. It is vital the UK Plc provides its input and cooperation as this will ensure the optimal evolution of the audit and wider corporate governance regime.
Read a full explanation of our position by Scott Knight, Head of Audit, here and our response to the government’s consultation available here.
Questions and Answers
When will the BEIS consultation end?
The BEIS consultation will close on 8 July 2021.
When will the proposed reforms to audit and corporate governance come into force?
We expect that following the formation of ARGA, proposed for 2023, that other consultation proposals will come begin to come into force in a phased manner.
Which companies will be affected by the proposed changes to audit?
The proposals seek to expand the definition of Public Interest Entities (PIEs) which will bring into scope large privately owned companies as well as AIM listed businesses. The wide-ranging reforms look to increase accountability for directors, shareholders, audit firms and the regulator.
How will the proposals affect company directors?
Section two of the White Paper look at increasing the accountability of directors. You can find more detail about the proposals here.
Some questions that you may want to ask yourselves in relation to your existing controls framework
- Will the adequacy of existing controls allow the Directors to attest to their effectiveness for financial reporting? Are these auditable?
- Do you have existing controls frameworks and tools which can be leveraged?
- Do you have any projects or change programmes which may be impacted or require future proofing? Can you utilise existing systems to automate controls?
Is this a UK Sarbanes-Oxley?
The consultation proposes three options in relation to strengthening internal controls which, similarly to the US Sarbanes-Oxley regime explores director and audit firm attestation over internal controls. More information on this can be found here.
Will there be a new and/or more audit powerful regulator?
The Government is seeking to establish new rules for ARGA. The Government has stated that the new regulator should be more proactive in identifying and taking action where there are matters of serious concern in relation to PIEs. However, new powers to address serious concerns will be limited to the areas where the regulator has existing enforcement powers over corporate reporting and audit.
Will charities be affected by these reforms?
The proposed reforms will have some impact on charities and their governance. You can find out more about the possible repercussions here.