In a letter to Parliament, the Chartered Institute of Internal Auditors called on the U.K. government for new legislation to reform how the audit industry is regulated in the wake of a series of major corporate collapses.
The professional association, which represents internal auditors in the United Kingdom and Ireland, asked for the government to find parliamentary time for audit regulator reform following a series of audit failures leading to collapses of such companies as Carillion, Thomas Cook, and others. “New legislation is required to give the new audit regulator, the Audit, Reporting, and Governance Authority (ARGA), the powers and authority it needs to do its job properly after it takes over from the Financial Reporting Council (FRC),” the Chartered IIA wrote.
In a letter to the Business Secretary, Andrea Leadsom MP, the Chartered IIA’s Chief Executive, Ian Peters:
- Called on the Government to, ‘Ensure parliamentary time is found to pass the legislation required in the coming months.’
- Warned the Business Secretary that, ‘Given recent corporate collapses (BHS, Carillion, Patisserie Valerie and Thomas Cook) we believe it is critical the Government now takes urgent action to replace the FRC with ARGA.’
- Outlined why audit regulator reform is so urgently needed, ‘Such reform is vital in order to strengthen the UK’s corporate governance framework, in helping to identify and prevent future corporate collapses.’
On 11 March 2019 the previous Business Secretary, Greg Clark MP said about audit reform that, “the government intends to move swiftly to implement these reforms and overhaul the sector.” But seven months later no audit regulator reform legislation has been introduced in Parliament.
On 7 October 2019, a week before the Queen’s Speech, the Business Secretary said, “Where legislation is required, as with reform to the audit market, the Government remains committed to legislating as soon as parliamentary time allows.” But the Queen’s Speech on 14 October 2019 did not contain any audit regulator reform legislation.
“The collapses of Carillion and others highlight the urgent need for audit regulator reform,” said Peters in the notice. “The absence of the necessary legislation from the Queen’s Speech was a huge missed opportunity and has raised serious questions about the Government’s commitment to reforming the audit regulator.”
Added Peters: “I have urged the Business Secretary to find parliamentary time without delay, to pass legislation which would give ARGA the powers it needs to do its job and help prevent future corporate collapses.” 