Blog Full

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

Almost half (45%) of firms are being “severely” or “significantly” affected by skills shortages and a total of 74% of respondents said that compared with three years ago, the shortages have got significantly worse.

A new global accountancy report has laid bare the “existential” skills crisis facing the industry – uncovering an “ever-widening chasm” between increasing demand and the shortening supply of talent.  

According to the new Accounting Talent Index, a new global research study conducted and written by outsourcing specialists Advancetrack, almost half – 45% – of firms are being “severely” or “significantly” affected by skills shortages.  

With the report surveying firms across continents, the figure is estimated to scale to hundreds of thousands of firms. However, even with the global economy showing green shoots of recovery, it appears there’s little good news on the horizon for accountants competing for talent.  

A total of 74% of respondents said that compared with three years ago, the shortages have got significantly worse. 

The report said reasons for this ranged from more competition for talent from commerce firms to fewer people attending and graduating from university, as well as the effects of the Covid pandemic and an ageing workforce.  

“Our Accounting Talent Index shows how the acute lack of accountants has emerged as a critical bottleneck, and its impact has been nothing short of severe, impacting businesses, institutions and economies on a global scale,” said Vipul Sheth, MD of Advancetrack.

“It’s made clear in no uncertain terms how everyone, from multinational corporations to SMEs right through to the hundreds of thousands of accounting firms around the world servicing them, are struggling under the weight of these significant challenges. It’s a perfect storm.

Sheth noted that without skilled practitioners and a “robust” sector to oversee financial transactions, tackle regulatory complexities, and ensure compliance, “the stability of modern commerce is genuinely at risk.” 

The Index reveals 61% of respondents thought the Covid-19 pandemic had made an “appreciable difference” to accessing industry talent.

It said smaller firms are especially bearing the brunt – largely unable to compete against the salaries and prestige offered by mid-tier  accountancy firms and the ‘Big Four’, with the latter also struggling to compete against other industries.  

The majority feel the Covid-19 pandemic has “accelerated trends” that were well underway before the first lockdown in early 2020, the report found. 

Other straining effects firms are seeing on a day-to-day basis from the crisis include needing to pay out higher salaries, challenges in recruiting and retaining staff, limiting the services they offer and being forced to not take on new clients.  

Vipul added: “Given these challenges, it’s crucial we engage with governments, industry leaders, and influential stakeholders to reinforce the critical role that accountants play in maintaining the integrity and accountability of financial systems.  

“While the solutions are not exhaustive, or all yet identified, significant strides can be made by investing in the development of accounting talent, rethinking recruitment approaches, and promoting the essential role of accountants in supporting economic stability.” 

Smithink Advisory partnered with Advancetrack for the report, with the findings unveiled to delegates at Advancetrack’s gbX Conference in London. 

Accountancy Age  Reports May 23rd 2024