UK’s audit watchdog sets out plans to shakeup Britain’s accounting sector
The UK’s accountancy watchdog has vowed to put in place a raft of new measures to increase standards in the UK’s audit sector in a bid to pave the way for the UK government’s long-awaited reforms.
The UK’s Financial Reporting Council (FRC) on Tuesday published a paper outlining its plans to revise existing codes, strengthen standards, and overhaul the UK Corporate Governance Code, in line with the UK government’s plans for audit sector reform.
The FRC’s plans are set to see the watchdog strengthen its requirements around sustainability reporting and tighten rules for company directors on the signing off of company accounts. The watchdog also said it plans to “simplify” reporting requirements, whilst ensuring standards remain high.
The paper is aimed at providing clarity around the government’s long-awaited overhaul of the UK’s audit sector, with a view to outlining the FRC’s plans to lay the foundations for reform of the audit sector, whilst the government puts more far reaching legislative measures in place.
FRC chief executive Sir Jon Thompson said: “These long-awaited reforms are a once-in-a-generation opportunity to ensure corporate Britain upholds the highest standards of governance and protects those stakeholders who rely on high-quality reporting.”
“While we await Government legislation, the FRC is pressing ahead with those changes to standards and codes which will improve and enhance the UK’s audit and corporate governance framework and to lay the groundwork for the creation of ARGA.”
The FRC’s proposals come after the UK government set out plans to shake up the country’s audit sector, as a means of restoring trust in British business, following a series of major accounting scandals involving some of the UK’s largest firms.
The plans are set to see the government replace the FRC with a new, more powerful regulator – dubbed the Audit, Reporting and Governance Authority (ARGA) – and force the Big Four accountancy firms to share audits of major, listed companies with smaller, challenger firms.
Selina Sagayam, a partner at Gibson Dunn, said the FRC’s proposals are “largely in line” with the government’s own plans to reform the audit sector. Sagayam said plans to put in place a clear framework around sustainability reporting will likely as a “welcome” development, in the face of mounting scrutiny over “instances of greenwashing”.
The law firm partner said the FRC’s plans to “simplify” reporting requirements will likely also be welcomed by both corporates and stakeholders, as she claimed that those subject to reporting requirements “have grown tired with the ever-increasing weight of the burden of compliance” with new reporting rules.