The leadership of the Institute of Directors (IoD) and the Chartered Institute of Internal Auditors has voiced strong criticism regarding the UK government’s recent decision to abandon the Audit Reform and Corporate Governance Bill. In an open letter addressed to Business Secretary Peter Kyle, these leaders condemned the government’s U-turn as “a significant step backwards,” particularly in light of prior commitments made during the King’s Speech, which included a pledge to publish a draft bill.
On October 3, 2023, the Department for Business and Trade announced its intention to scrap the Audit Bill to “avoid significant new costs to firms.” This announcement came as a surprise, especially considering that the bill was previously put on hold by the Conservative government in November 2023 to focus on economic growth and the UK’s global competitiveness. The bill had been revived following Labour’s assumption of power.
The proposed reforms aimed to fundamentally change the landscape of audit and corporate governance by replacing the Financial Reporting Council (FRC) with a new regulatory body, the Audit, Reporting and Governance Authority (ARGA). The leaders’ letter emphasizes the critical need for robust oversight of major corporations, stating, “If the government is serious about driving growth and delivering economic stability, it must act to prevent further avoidable failures through stronger oversight of our largest companies.”
In addition to Jonathan Geldart, director general of the IoD, and Anne Kiem OBE, chief executive of the Chartered Institute of Internal Auditors, the letter was signed by Catherine Howarth, chief executive of ShareAction, alongside eight other industry leaders and academics. They urged the government to prioritize the introduction of a modernized corporate reporting framework and to expedite the establishment of a strengthened audit regulator.
The government’s decision to revert to focusing on the FRC has drawn further criticism from industry stakeholders. Dean Beale, executive director of the Centre for Public Interest Audit, expressed his disappointment in a separate letter, describing the move to drop the Bill as “deeply disappointing.”
The backlash from industry leaders highlights the ongoing tension between government economic strategies and the need for enhanced regulatory frameworks in corporate governance. As discussions continue, the implications of this U-turn on corporate accountability and oversight remain a critical area of concern for stakeholders across various sectors.
