In its original findings from its Thomas Cook inquiry in October 2019, the BEIS Committee expressed “disappointment’ that the Government had not pressed ahead with audit reforms and brought forward legislation to replace the Financial Reporting Council with the Audit, Reporting and Governance Authority (ARGA).
On a timetable for action on ARGA, the Government’s response, which was published yesterday (14 June), read: “…to create the new Audit, Reporting and Governance Authority will follow as soon as Parliamentary time allows.”
Darren Jones, chair of the BEIS Committee, said recent audit “scandals” highlight the need for the Government to tackle this issue as “a matter of urgency”.
He said it comes at a time when businesses are facing “tough trading conditions”, and added when balance sheets are under “significant pressure” it’s important investors and other stakeholders can have “confidence in audits”.
In the response to the BEIS report, the government said: “As the Committee’s conclusions acknowledge, standards of audit and corporate governance have come under the spotlight on too many occasions.
“That is why the Government commissioned three major reviews covering audit regulation, the audit market and the audit product itself. The last of these reported in December. The reviews are interlinked, and we are now developing a coherent reform programme that takes account of all of their recommendations.”
It added: “We will respond with comprehensive proposals, and legislation to create the new Audit, Reporting and Governance Authority will follow as soon as Parliamentary time allows. In many areas we do not need legislation and where that is the case we are making progress with implementation.”
Jones said: “The Secretary of State’s evidence to the BEIS Committee last week failed to give a date for when primary legislation would come forward on audit reform.
“While the Government has a series of priorities at the moment, given the importance of audit and the fact the Department already has a raft of practical audit measures sitting on its desk gathering dust, we should expect the Business department to show far more urgency to help drive through the reforms needed on audit and on corporate governance.”