Submission on restoring trust in audit and corporate governance

The UK Department for Business, Energy & Industrial Strategy (BEIS) published a consultation paper with a comprehensive package of proposals aimed at restoring trust in audit and corporate governance. This was in response to recommendations made by the following three independent reviews commissioned by the UK Government in 2018:

• Sir John Kingman’s independent review of the Financial Reporting Council
• The Competition and Market Authority’s statutory audit market study
• Sir Donald Brydon’s independent review of the quality and effectiveness of audit

Our joint submission with ACCA focuses on matters of international significance. The key points we raise include:

• We agree that the whole ecosystem around audit needs to evolve before audit can evolve.
• We do not support the creation of a new corporate auditing profession that is separate from the accounting profession.
• We support a directors’ statement on internal controls, but we believe that leaving the audit of that statement as optional does not go far enough.
• We caution that some of the proposals have the potential to create regulatory divergence and have extraterritorial reach.