Audit

Chartered IIA welcomes draft audit reform commitment in Queen’s Speech

As part of the 140-page document accompanying the Queen’s Speech yesterday (10 May), the government has outlined its plans to reform the auditing framework.

The Chartered IIA has “welcomed the commitment” to draft audit reform bill in Queen’s Speech but calls on Government to “now get on” and issue its full response to Audit White Paper it published over a year ago.

As part of the 140-page document accompanying the Queen’s Speech yesterday (10 May), the government has outlined its plans to reform the auditing framework.

The main elements of the draft Bill are: 

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  • Establishing a new statutory regulator, the Audit, Reporting and Governance Authority, that will protect and promote the interests of investors, other users of corporate reporting and the wider public interest.
  • Providing new measures to open up the market, including a new approach of managed shared audit in which challenger firms undertake a share of the work on large-scale audits. This will improve the quality and usefulness of audit; and boost resilience, competition, and choice in the audit market.
  • Bringing the largest private companies in scope of regulation in the definition of ‘public interest entities’, recognising the public interest in companies of this size.
  • Giving the new regulator effective powers to enforce directors’ financial reporting duties, to supervise corporate reporting, and to oversee and regulate the accountancy and actuarial professions. 

The gov said the bill will be designed to:  “Improve protection for the UK against risks to jobs, pensions, and suppliers from unexpected company collapses, by improving scrutiny of the largest non-listed companies and strengthening the insolvency framework to increase confidence in the system.”

John Wood, CEO of the Chartered Institute of Internal Auditors, said: “We are delighted that the Government has committed to a draft Audit Reform Bill in the Queen’s Speech. We believe putting the audit regulator on a statutory footing with the legal powers it needs to do its job effectively, is vital to restoring trust in audit and corporate governance.

“However, while this is a step in the right direction, we are somewhat disappointed that the important proposal for stronger internal company controls may now not be delivered by legislation.”

He added: “We urge the Government to get on and swiftly issue its full response to the White Paper it published over a year ago, including full details on how it plans on progressing some of the other key proposals, along with a clear timetable for implementation.”

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