June 12, 2019
Published: International Accounting Bulletin
The Chartered Institute of Internal Auditors has urged the government to introduce legislation to establish a new audit regulator before the end of 2019 ‘under the swiftest possible parliamentary timetable’. The aim is to ensure the UK has a regulator that is best in class for corporate governance and help reduce the risk of another Carillion-style corporate collapse.
The Chartered Institute of Internal Auditor’s response to a government consultation on the recommendations of Sir John Kingman’s independent review of the FRC (Financial Reporting Council) has also called for the:
– FRC to be abolished and replaced by an entirely new audit regulator, putting it on a statutory footing, with enhanced powers and the authority to do its job properly
– appointment of a board of directors at the new audit regulator, with responsibility for embedding a new proactive regulatory culture with a greater willingness to act swiftly and fully use its new powers
– new audit regulator to be give the power (through a change in the law) to sanction all relevant directors for misconduct, including disqualification. Currently the FRC can only sanction chartered accountants, which provides a negative incentive for CFOs to surrender their accountancy qualifications
– widening of the definition of a public interest entity beyond premium listed companies. When BHS collapsed it was a large private company and wasn’t subject to the same corporate governance and audit regulations for premium listed firms.
Dr Ian Peters MBE, Chief Executive of the Chartered Institute of Internal Auditors said: “A long delay to the replacement of the audit regulator, caused by increasing levels of political uncertainty, could increase the risk of more Carillion-style corporate collapses which have cost thousands of jobs and millions of pounds of taxpayer’s money.
“Replacing the FRC with the new Audit, Reporting and Governance Authority must be the government’s number one priority in raising corporate governance standards in the UK. A new audit regulator should be established under the swiftest possible parliamentary timetable with the legislation introduced in 2019. That means radical reform of the audit regulator taking months, not years.”