Leaders from prominent business organizations have expressed strong disapproval of the UK government’s recent decision to abandon the Audit Reform and Corporate Governance Bill. In an open letter directed to Business Secretary Peter Kyle, executives from the Institute of Directors (IoD) and the Chartered Institute of Internal Auditors criticized the move as a “significant step backwards.”
The announcement, made public on October 3, 2023, revealed the government’s intention to scrap the proposed legislation, which was initially outlined in the King’s Speech. The Department for Business and Trade indicated that this decision aims to “avoid significant new costs to firms.” The Bill had been put on hold by the Conservative government in November 2023, focusing instead on “growth and the UK’s competitiveness.” However, following the Labour party’s ascension to power, the Bill was reconsidered, prompting hope for comprehensive reforms in audit and corporate governance.
Industry Leaders Demand Stronger Oversight
The proposed reforms were designed to replace the Financial Reporting Council (FRC) with a new regulatory body, the Audit, Reporting and Governance Authority (ARGA). This change was seen as a necessary step to enhance oversight of corporate practices, particularly in light of several high-profile business failures in recent years.
In their letter, IoD Director General Jonathan Geldart, along with Anne Kiem OBE, Chief Executive of the Chartered Institute of Internal Auditors, and Catherine Howarth, Chief Executive of ShareAction, emphasized the need for robust regulatory frameworks. They stated, “If the government is serious about driving growth and delivering economic stability, it must act to prevent further avoidable failures through stronger oversight of our largest companies.”
The letter was co-signed by ten other industry leaders, campaigners, and academics, underscoring a broad consensus on the importance of the proposed reforms. The signatories urged the government to prioritize the publication of a modernized corporate reporting framework without delay, advocating for a more effective audit regulator.
Further Disappointment from Audit Advocates
The response to the government’s decision has not been limited to business leaders. Dean Beale, Executive Director of the Centre for Public Interest Audit, also articulated his disappointment in a separate letter. He described the decision to drop the Bill as “deeply disappointing,” echoing the sentiments of those advocating for stronger corporate governance.
As the UK navigates its economic recovery, the implications of the government’s reversal on audit reform remain to be seen. Industry leaders are calling for immediate action to ensure that the necessary structures are in place to safeguard against future corporate failures and to promote transparency and accountability within the business sector.
