UK: Government confirms proposals for audit and governance reform

The Department for Business, Energy and Industrial Strategy today published its response, and proposals, following last year's white paper consultation Restoring Trust in Audit and Corporate Governance: see here (pdf). The accompanying press release is available here.    

The Financial Reporting Council - set to become the Audit, Reporting and Governance Authority (ARGA) with new powers through legislation under the Government's plans - has welcomed the Government's proposals although its chief executive, Sir Jon Thompson, described as a "missed opportunity" the decision not to introduce a statutory version of the Sarbanes-Oxley internal control statement: see here. Instead, the Government will invite the FRC/ARGA to include such a statement in the UK Corporate Governance Code as part of a review of its internal control principles and provisions.

Dramatic changes to the auditing profession now seem most unlikely, the Government having decided against seeking to establish, at this stage, a new corporate auditing framework or a new professional body for auditing. Instead, ARGA is to be invited to work with the existing professonal bodies to improve auditor education and continuing professional development.

Other proposals include giving ARGA the power to set new minimum requirements for audit committees.  It will also be given the power to investigate and sanction certain breaches of reporting and auditing responsibilities by directors of public interest entities.