Government must legislate to deliver audit regulator reform without delay
29 October 2019
The Chartered IIA has today called on the government to find parliamentary time for audit regulator reform following a series of corporate collapses including Carillion and Thomas Cook.
New legislation is required to give the new audit regulator, 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).
In a letter to the Business Secretary, Rt Hon Andrea Leadsom MP, the Chartered IIA’s Chief Executive, Dr Ian Peters MBE:
- 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.
Dr Ian Peters MBE, Chief Executive of the Chartered Institute of Internal Auditors said:
“The collapses of Carillion and others highlight the urgent need for audit regulator reform
“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.
“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.”
Notes for editors
1. The Chartered IIA’s letter to the Business Secretary, Rt Hon Andrea Leadsom MP on 24 October.
2. The government audit reform agenda and subsequent delays:
- 18 December 2018 - Sir John Kingman’s review of the FRC concludes and recommends creating a new regulator (ARGA) for audit, corporate reporting and corporate governance.
- 11 March 2019 - The government pledges the new audit regulator (ARGA) will have "a new mandate, new leadership and stronger powers set down in law" and said, "the government intends to move swiftly to implement these reforms and overhaul the sector."
- 7 October 2019 - 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."
- 14 October 2019 - The Queen’s Speech did not contain audit reform legislation.
- 15 October 2019- Sir John Kingman expressed his disappointment that legislation to put the new regulator on a "proper statutory base and give it the powers to do its job" was not included in the Queens Speech.
3. The Chartered IIA is the only professional body dedicated exclusively to training, supporting and representing internal auditors in the UK and Ireland. We have over 10,000 members in all sectors of the economy. First established in 1948, we obtained our Royal Charter in 2010. About 1,000 of our members hold the position of Head of Internal Audit and the majority of FTSE 100 companies are represented among our membership. Members are part of a global network of 200,000 professionals in 170 countries.
