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Audit reform looks like it could finally take a step forward after being included in the King’s Speech.

A long-waited commitment to audit and corporate governance reforms has been included in the King’s Speech.

More than 35 bills and draft bills are being introduced in a bid to “enable economic growth”, says Labour, with the focus being on accelerating the building of houses and infrastructure, improving transport, creating more jobs and securing clean, green energy.

New laws are also being designed to hand power back to local leaders.

Different story

At the last King’s Speech in November, the omission of audit reform was met with disappointment from across the accounting profession. However, it’s a different story today.

“Stability will be the cornerstone of my government’s economic policy and every decision will be consistent with its fiscal rules,” said King Charles among his first points. “It will legislate to ensure that all significant tax and spending changes are subject to an independent assessment by the Office for Budget Responsibility (Budget Responsibility Bill).

“Bills will be brought forward to strengthen audit and corporate governance, alongside pension investment (Draft Audit Reform and Corporate Governance Bill, Pension Schemes Bill).”

Crucial part of the reforms

Alan Vallance, Institute of Chartered Accountants in England and Wales (ICAEW) chief executive, expressed delight that more than six years on from the collapse of Carillion, the legislation has been backed as a priority.

“Reliable, trusted reporting by companies is fundamental to investor confidence, which in turn is key to economic growth and stability,” he said. “This long-awaited reform will not only reduce the risk of disorderly business failure, but will contribute to the transition to net zero.

“Establishing the new statutory regulator – the Audit, Reporting and Governance Authority (ARGA) – and providing it with powers to take effective enforcement action against directors of UK public interest entities, is a crucial part of these reforms.

“We look forward to seeing a package of measures which, taken together, will make Britain the best place in the world to invest and to start, run and grow a business.”

Severely overdue

Gavin Hayes, head of policy and public affairs at the Chartered Institute of Internal Auditors, added: “We are delighted that the government has committed to a draft Audit Reform and Corporate Governance Bill in the King’s Speech.

“Ensuring the audit regulator has the legal powers it needs to do its job effectively is vital to restore trust in the audit and corporate governance system which underpins our economic stability.”

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Mike Suffield, director of policy and insight at the Association of Chartered Certified Accountants (ACCA), said audit reform has been “severely overdue in the UK, yet repeated delays have sidelined it, despite the importance of it in promoting the UK as a great place to do business”.

“ACCA has long called for this implementation, so to see it included in the King’s Speech as one of the first points of the speech is a huge step forward.

“Legislation will place the planned new regulator, the ARGA, on a statutory footing and will set out clear expectations and accountability for boards, management and auditors.

“The shift of the Financial Reporting Council to ARGA as a clear independent watchdog will strengthen the oversight of audit quality so that audit firms can be held properly to account, introducing changes that have been needed since the collapse of Carillion in 2018.”

by 

Matthew Ord

Accountancy Daily(Edited)

The possibility of swift progress on audit reform will be keenly watched as the Department for Business has already posted an update to guidance

Audit reform is now under the remit of the new secretary of state for business, Jonathan Reynolds, supported by ministers Douglas Alexander and Sarah Jones.

As government websites are being updated to reflect the new Labour government, a minor update to the guidance on audit and corporate governance reform on gov.uk has been posted, with the government stating that ‘reference to draft regulations amended as the government withdrew these on 16 October 2023’.

This information referred to the previous Conservative government’s decision to not include audit reform in the November 2023 King’s Speech.

Although long promised audit reform never got as far as draft legislation in the last parliament, with a July 2023 announcement referencing ‘a factual overview of draft regulations that the government laid in parliament on 19 July 2023’, it had been hoped that the legislation would make the statute books.

However, part of ambitious plans for audit reform were dropped as part of the Conservative government’s ambition to ‘remove additional reporting requirements’.

Draft regulations published last July would have added additional corporate and company reporting requirements to large UK listed and private companies, including an annual resilience statement, distributable profits figure, material fraud statement and triennial audit and assurance policy statement.

At the time the business minister Kevin Hollinrake indicated that reform would go ahead, stating: ‘The government remains committed to wider audit and corporate governance reform, including establishing a new Audit, Reporting and Governance Authority to replace the existing Financial Reporting Council. We will bring forward legislation to deliver these reforms when parliamentary time allows.’

Audit reform has been on the cards for nearly a decade following a string of audit disasters as failed companies such as Carilion, BHS, and scandals related to the audits of a host of companies including Rolls-Royce and Connaught Housing.

In 2018, there were three critical reviews of the audit market conducted by the Competition & Markets Authority (CMA), Sir John Kingman Review and Sir Donald Brydon’s Independent Review of the Quality and Effectiveness of Audit.

As early as 2012, the House of Lords Economic Affairs Committee produced a detailed report into audit market calling for radical reform of the audit sector.

ICAEW has called on the new Labour government to ‘commit to taking forward audit and corporate governance reform and legislate to clear the local audit backlog in England in its first 100 days in office’.

‘As a priority, the new government should enact the long-delayed reforms to the UK’s audit and corporate governance regime, including establishing the new statutory regulator ARGA and giving it powers to take effective enforcement action against directors of UK public interest entities.

‘Taking early action in this area will reduce the risk of unexpected business failure and deliver on existing commitments to reinforce the UK as a trusted destination for investment.’

The Department for Business & Trade has been contacted for comment.

Writes Sara White in Accountancy Daily

Increasingly complex tax rules are creating a surge in vacancies for tax trained specialists across the UK with demand up 40% this year

Vacancies in personal tax have seen the greatest surge, with a five fold increase in the monthly average compared to 2023, making it the fastest-growing area being recruited for.

This is followed by indirect tax, with an overall increase of 72%. Corporate tax remains the largest specialist area, with a 65% uplift from last year.

London remains the largest area for vacancies overall, while there has been a growing talent squeeze in the southwest of England, according to the UK Finance Labour Market Trends report by Morgan McKinley and Vacancysoft.

Tom Wood, senior manager at Morgan McKinley said: ‘In today’s tax market, demand for tax professionals remains robust across all levels.

‘Boutiques led by former practice partners are gaining significant market share by utilising their networks to attract top talent.

‘Notably, the big four firms are adapting compliance offerings to meet evolving client needs.

‘Overall, there is a demand for experienced leadership in professional services firms underscoring the need for seasoned professionals to navigate complex issues. In the short term, work will spike as people look to adjust to the upcoming legislation changes.’

The Big Four continued to see large increases in tax vacancies in Q1.

When ranking organisations, PwC led the way, with 80 advertised tax vacancies in Q1, which was higher than the total for 2023.

EY took second place recording an increase of 80%, while Deloitte had significantly smaller volumes.

Outside of the Big Four, PKF Francis Clark has posted 50 tax vacancies so far this year compared to 80 across the whole of 2023. BDO was looking for 33 tax specialists, followed by Evelyn Partners with 27 vacancies. Fortis Mazars has posted 21 tax vacancies so far this year compared to 22 across the whole of 2023.

Outside of the accountancy sector, JP Morgan was the leading recruiter with nine advertised tax vacancies so far this year.

A potential change of government is also likely to drive demand for tax specialists with Labour in particular planning a number of significant tax changes, including VAT on private school fees, changes to non-dom rules over and above current Conservative plans outlined at the Budget, and private equity rules on carried interest affecting earnings.

By Sara White Accountancy Daily 14th June 2024

US-based firms Aprio, PKF O’Connor Davies, Carr, Riggs and Ingram, and Armanino are all planning to sell stake

Ten of the 30 largest accountancy groups in the US could soon be owned by private equity groups, the Financial Times has revealed. 

Atlanta-based accountancy firm Aprio was allegedly planning to sell a stake to Charlesbank Capital private equity firm, while PKF O’Connor Davies and Carr, Riggs and Ingram are engaging in further sales processes. Californian firm Armanino is also mulling on the sale to a private capital provider. 

The surge in deals within the industry has led to one-third of the top 30 firms either securing or being on the verge of securing private equity investment. 

But regulators have expressed concerns about audit quality and “tone” being affected by private equity ownership. 

The news comes after Grant Thornton’s US arm and Baker Tilly both recently agreed to sell a majority stake to two private equity firms, New Mountain Capital and Hellman and Friedman respectively. 

Alan Whitman, former chief executive of Baker Tilly, said to the FT: “Partners are waking up to the fact that there is a leverage to be had by tapping into the capital markets. The capital needs of the firms have increased exponentially in recent years, in terms of people costs and investments in offshoring and technology.” 

Source Accountancy Today