Future of Audit – Government’s response ‘in danger of kicking vital reforms into the long grass’, says Business Committee

The Business, Energy and Industrial Strategy Committee has today published the Government’s response to the Committee’s report on the Future of Audit.

In summary, the Government’s response to many of the recommendations is that they are currently, or will shortly be, consulting on the issues raised in the BEIS Committee’s Future of Audit report.  

Rachel Reeves MP, Chair of the BEIS Committee, has written (see attached) to the Secretary of State to request the Government set a deadline for the conclusion of this consultation process. The correspondence also calls on the Government to state whether its intention is to consult on the implementation or the substance of the CMA and BEIS Committee proposals.

Commenting on the Government response, Rachel Reeves MP, Chair of the BEIS Committee, said: “The collapse of Carillion and accounting scandals at Tesco, BT and Patisserie Valerie and others have provided a painful lesson that audit isn’t working. Businesses, investors, pension-holders and the public deserve better. Urgent audit reform is needed, not yet further consultation.

“The CMA and BEIS Committee’s extensive inquiries on audit proposed a range of practical recommendations to improve competition, tackle conflicts of interest and improve the culture of challenge in audit firms. Their response to our report suggests the Government is in danger of kicking vital audit reforms into the long grass. We should not wait for the next corporate collapse. The Government needs to ignore the lobbying of vested interests in audit and set out a clear timescale for delivering on the substance of the CMA and BEIS Committee’s recommendations”.

The BEIS Committee’s report was published on 2 April and endorsed the CMA’s proposed operational split between audit and non-audit but argued that it may be necessary to go further with a structural break-up in order to tackle the conflicts of interest in the audit market and ensure the professional scepticism needed to deliver high-quality audits.

A full list of the BEIS Committee Future of Audit report’s recommendations is available here. The Government response is attached.