Business Secretary Kwasi Kwarteng today launches his long-awaited response to a consultation on the future of auditors
The under-fire audit sector faces a long – awaited overhaul as the Government introduces a regulator – despite ministers being accused of watering down plans.
Business Secretary Kwasi Kwarteng today launches his long-awaited response to a consultation on the future of auditors and corporate governance in the wake of a string of accounting scandals. Industry reform is being undertaken by the Government to slash the risk of sudden company collapses across Britain after high profile failures such as constructor Carillion and department store chain BHS in recent years.
One of the aims will be to combat the dominance of the Big Four audit firms, with Kwarteng pledging to ban failing auditors from reviewing large companies’ accounts. Company directors will also be on the hook for hefty fines should they lie about the state of a firm’s finances.
Business minister Lord Callanan said: ‘By restoring confidence in audit and corporate reporting we will strengthen the foundations of UK plc, so it can drive growth and job creation across the country.
‘When big firms suddenly go bust it can affect thousands of jobs – those in charge shouldn’t just waltz off like nothing happened.
‘These new rules will be a wake-up call for any bosses who have been asleep at the wheel of our biggest businesses.’
One of the aims will be to combat the dominance of the Big Four audit firms, with Kwarteng pledging to ban failing auditors from reviewing large companies’ accounts
A regulator called the Audit, Reporting and Governance Authority will replace the existing Financial Reporting Council. The body will be granted powers to review the largest private companies with a turnover in excess of £750m. But accountant and academic Lord Sikka told the Mail the Government’s proposal was purely ‘cosmetic’.
He said: ‘It will do nothing whatsoever to stem financial scandals or help with corporate governance.’
He said the detail provided by officials does not suggest that any of the issues highlighted by the likes of Carillion or BHS ‘are really being addressed’.
‘Those who don’t learn from history are destined to repeat it,’ he said, adding that ‘for more competition’ the big firms should be broken up.
