Consultation outcome - Restoring trust in audit and corporate governance: proposals on reforms

From: Department for Business, Energy & Industrial Strategy

Restoring trust in audit and corporate governance: government response to consultation on strengthening the UK’s audit, corporate reporting and corporate governance systems

PDF, 1.2 MB, 197 pages

Detail of outcome

The government’s case for reform received a positive response, confirming our belief that changes are needed to rebuild trust in audit and corporate reporting, ensure the UK reputation for high standards of corporate governance is maintained, and lay the foundations for a stronger, healthier audit market.

The government response sets out our intentions to proceed with reforms that include: 

• establishing a new regulator, the Audit, Reporting and Governance Authority (ARGA), with the overarching objective to protect and promote the interests of investors, other users of corporate reporting and the wider public interest
• recognising the public interest in large private companies, by ensuring they meet the same high standards of reporting and accountability as are expected from large listed companies
• making large companies’ reporting more useful, with better information about the risks they face and what information has been assured, and strengthened review powers for the regulator
• strengthening reporting about companies’ internal controls which underpin true and fair accounts, through the Corporate Governance Code
• improving the quality of audit and making it more informative, driven by the regulator’s responsibilities for standards, inspection and approving registration of auditors for the most significant companies
• boosting resilience, competition and choice in the audit market, through the introduction of a ‘managed shared audit’ requirement for FTSE 350 companies, and requiring an operational separation of audit and non-audit practices
• making directors of the country’s biggest companies more accountable for significant failures in their corporate reporting and audit related duties
• strengthening oversight of the accountancy and actuarial professions to build confidence in the professions and in the UK

Detail of feedback received

We received over 600 responses to our white paper. The responses included support for:

• the establishment of the new regulator
• the aims of improving audit quality
• tackling fraud
• improving the usefulness of corporate reporting
• the intended outcomes of greater trust in reporting and greater resilience of companies

Feedback from consultation has helped fine-tune the package of measures that the government will bring forward to achieve these objectives.

We’re seeking views on proposals to strengthen the UK’s framework for major companies and the way they are audited.

This consultation ran from
9:30am on 18 March 2021 to 11:45pm on 8 July 2021

Consultation description

In this white paper we’re seeking views on proposals to strengthen the UK’s framework for major companies and the way they are audited. The proposals set out how:

• companies should report on their governance and finances
• reports should be audited
• audit and the audit market should change
• these should be overseen by a new regulator

The objectives of these reforms are to:

• restore public trust in the way that the UK’s largest companies are run and scrutinised
• ensure that the UK’s most significant corporate entities are governed responsibly
• empower investors, creditors, workers, and other stakeholders by giving them access to reliable and meaningful information on a company’s performance
• keep the UK’s legal frameworks for major businesses at the forefront of international best practice

The proposals respond to recommendations made by 3 independent reviews commissioned by the government in 2018:

• Sir John Kingman’s Independent review of the Financial Reporting Council
• the Competition and Market Authority’s statutory audit market study
• Sir Donald Brydon’s independent review of the quality and effectiveness of audit

The consultation is open to anyone with an interest in this area, but in particular we would like to hear from:

• users of financial statements
• investors
• shareholders
• business stakeholders including creditors
• firms regulated by the Financial Reporting Council
• large public and private companies and their directors
• other regulatory bodies such as professional associations that represent their members’ interests

We have published a consultation stage impact assessment alongside this consultation. The supplementary publication on review recommendations provides further information on how each recommendation is being addressed.

We have also published the summary of responses to an earlier consultation, Statutory audit services: initial consultation on the Competition and Markets Authority recommendations, which should be read together with this white paper.

See the BEIS consultation privacy policy.

Please do not send responses by post at the moment as we may not be able to access them.

Restoring trust in audit and corporate governance: consultation on the government’s proposals

Ref: ISBN 978-1-5286-2401-5, CCS0221978662 03/21, CP 382PDF, 1.53 MB, 232 pages

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Impact assessment

PDF, 2.34 MB, 210 pages

Supplementary publication on review recommendations

PDF, 316 KB, 30 pages