Audit Reform U-Turn: Accounting Regulator Left in Limbo

The government’s move comes amid broader pressure on regulators across a range of industries to boost growth. In a letter sent on Tuesday to Liam Byrne, chairman of the business and trade select committee, Blair McDougall, a business minister, said that following a review the government had made “the difficult decision not to consult” on the “major package” of audit and corporate governance measures it had been considering. McDougall said this was because the government’s “priority is to promote economic growth and reduce administrative burdens”. • Patrick Hosking: Good governance may be boring, but it ensures long-term returns The decision means Arga is now unlikely to ever come to pass. Other key parts of the proposals, including changes to how so-called public interest entities (PIEs) are defined and giving the regulator greater powers to pursue directors, are also expected to be abandoned. “We cannot hide our disappointment that eight years since the collapse of Carillion and after many false dawns, the government has decided to scrap the audit and corporate governance bill,” Alan Vallance, chief executive of the Institute of Chartered Accountants in England and Wales, the main professional body, said. The decision is part of a “sweeping package of growth measures” unveiled on Tuesday by the government, which is vowing to cut regulation and red tape for businesses to help grow the economy. Although the industry was not expecting such an announcement so soon, the news that the government is scaling back its ambitions for audit reform will not come as a complete shock given the plans had been repeatedly delayed. Other events — trade wars, real wars and a sluggish economy — and a desire to boost growth have taken priority. “It was pretty obvious that things had gone quiet,” one senior auditor said. The government will continue with its efforts to put the FRC “on a proper statutory footing”, giving it more power when gathering information during its investigations and making firms’ contributions to the watchdog’s running costs mandatory rather than voluntary. “We recognise the government is balancing many competing priorities, which means the full package of reforms is not being taken forward — but the FRC has not been standing still and we will continue our work,” Richard Moriarty, chief executive of the body, said. The decision could face criticism from some policymakers, however. In September, 66 cross-party MPs and peers wrote to Sir Keir Starmer urging him to end the “indecision and sluggish progress” of audit reform. The letter, co-ordinated by the Chartered Institute of Internal Auditors, which represents about 10,000 audit professionals, said reform was needed to restore confidence in UK markets and support long-term economic growth. Signatories included Sir Geoffrey Clifton-Brown, the Conservative chairman of the public accounts committee and Baroness Hodge of Barking, the former Labour chair of the committee.