The United Kingdom’s Financial Reporting Council (FRC) has unveiled plans to revise its Corporate Governance Code for the first time in five years, aiming to increase accountability among U.K. boards and management teams.
The regulator’s proposals comes on the heels of Britain’s long-awaited response to a suggested shake-up of the U.K.’s audit and corporate governance regimes, which was triggered by the high-profile collapses of Carillion, Patisserie Valerie, and others.
In an unexpected turn, the government’s response abandoned plans to create a tighter, U.S.-style framework for internal controls, instead “inviting the regulator” to address the matter by strengthening the Corporate Governance Code. That has left some internal audit groups unhappy with the proposed revisions.
“We welcome the proposals to strengthen company directors’ responsibilities for ensuring the internal controls are effective,” says Ann Kiem, chief executive of the Chartered Institute for Internal Auditors, an internal audit professional organization covering the United Kingdom and Ireland. “However, we would also like to see the provisions in the Code regarding the requirement for premium-listed firms to have internal audit to also be strengthened and made clearer.”
Kiem says there is a glaring lack of emphasis on internal audit in the FRC’s new proposals.
In light of the governance failures, the Chartered IIA issued new “Code of Practice” that is says will promote more extensive access for internal auditors. The Code of Practice is intended to strengthen corporate governance among member’s organizations and to “help reduce the risk of major corporate collapses by boosting the status, standards, scope, and skills of internal audit,” the group said in a press statement on the proposed code.