IoD press release IoD welcomes long overdue audit overhaul
Responding to the news that the UK Government will overhaul the audit regime to help restore trust in big business, Dr Roger Barker, Director of Policy and Governance at the Institute of Directors, said:
“We welcome these reforms, which are long overdue responses to weaknesses in the current framework of corporate audit, reporting and governance.
“In particular, we are glad to see that the Government is committed to moving ahead with the establishment of a more effective audit regulator (ARGA) during this parliamentary session. Hopefully, the legislation that will make this possible will be forthcoming soon.
“It is understandable that the Government is limiting its expansion of Public Interest Entity to a smaller group of large private entities than first envisaged, given the need to minimise additional regulatory burdens on business in a challenging economic environment.
“We remain sceptical about requiring large audit firms to conduct audits in partnership with challenger firms. This is a step into the unknown, and the new audit regulator will need to keep the viability of this approach under close review.
“We welcome new requirements for large companies to disclose how they assure the quality and reliability of information in their annual reports outside the financial statements, including on climate, risk, and internal control.
“However, there are several things that we would have liked to have seen included in the reforms. Firstly, we would have liked to have seen ARGA take on a ‘purpose objective’ as part of its remit – whereby it would oversee reporting and governance in relation to a company’s stated business purpose. Secondly, the reforms could have helped take forward the objectives of the Better Business Act campaign – by emphasising the need for a more balanced stakeholder approach to business decision making rather than prioritising the interests of shareholders.”