UK Audit Reform and Corporate Governance Consultation

On Thursday 18 March, the Department of Business, Energy and Industrial Strategy (BEIS) released its long awaited white paper setting out proposals for audit reform and corporate governance (White Paper).

The White Paper follows three major reviews commissioned by the Government in 2018 and there are specific areas of the document that have particular relevance to companies, their directors and officers, and auditors. 

Against a backdrop of high profile company failures, and more recent economic and societal upheavals, the Secretary of State for BEIS, Kwasi Kwarteng, set out the aims of the White Paper:

• Increasing choice and quality in the audit market.
• Establishing clearer responsibilities for the detection and prevention of fraud.
• Ensuring that the audit product and profession are fit for the future.

In highlighting these areas for reform, the Secretary of State set his sights on all of the participants and stakeholders in this process: directors, auditors and audit firms, shareholders, and the regulator. The measures are aimed at improving director accountability and encouraging transparency. In particular the proposed changes could have a significant impact on directors’ duties and, as such, they are of potentially great importance to companies and those who run them.

There is a 16 week consultation period on the Government’s proposals. Regardless of whether the changes come into being to the extent proposed, what is clear is that the Government means business regarding the overhaul of the audit function and corporate governance that underpins UK commerce. It certainly seems that greater rigour in what is already considered by many to be a gold standard of regulation looks set to be the future for UK business.