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The paper follows the Government Response to the consultation on strengthening the UK’s Corporate Governance, Corporate Reporting and Audit systems

The Financial Reporting Council (FRC) has published a Position Paper which sets out the next steps to reform the UK’s audit and corporate governance framework.

The paper follows the Government Response to the consultation on strengthening the UK’s Corporate Governance, Corporate Reporting and Audit systems, including the creation of the Audit, Reporting and Governance Authority (ARGA), to replace the FRC.

The document reportedly builds on the areas of the Government Response that fall within the FRC’s remit, providing “advanced clarity for stakeholders on how the work of reform will be delivered ahead of government legislation”.

That work includes revising existing codes, strengthening auditing and accounting standards, setting expectations to drive behavioural change ahead of statutory powers, and the development of guidance to address issues set out in the Government Response.

In particular, the Position Paper sets out proposed changes to the UK Corporate Governance Code. The FRC said this will provide a stronger framework for reporting on the effectiveness of internal controls and board responsibilities for expanded sustainability and ESG reporting, and new guidance on enhanced resilience statements and fraud reporting by directors.

The FRC’s CEO, Sir Jon Thompson, said: “These long-awaited reforms are a once-in-a-generation opportunity to ensure corporate Britain upholds the highest standards of governance and protects those stakeholders who rely on high-quality reporting.

“While we await Government legislation, the FRC is pressing ahead with those changes to standards and codes which will improve and enhance the UK’s audit and corporate governance framework and to lay the groundwork for the creation of ARGA.”

Writes Heather Sandlin on Accountancy Today

Proposed AQIs would provide comparable indicators on perceived culture within an audit firm, audit quality inspection results, staff workloads, and the level of partners’ involvement in individual audits

The Financial Reporting Council (FRC) has issued a consultation on publishing audit quality indicators (AQIs) for the largest UK audit firms, which would provide users of audited information with greater detail on audit firms’ efforts to deliver high quality audit.  

The FRC said the 11 proposed AQIs would provide stakeholders with a range of comparable indicators on perceived culture within an audit firm, audit quality inspection results, staff workloads, and the level of partners’ involvement in individual audits.

It comes as there is currently limited available information that compares audit quality between the firms. Therefore, setting out AQIs to enable discussions between Audit Committee Chairs (ACCs) and audit firms on the drivers of audit quality will reportedly help ACCs to make more informed comparisons between firms when appointing external auditors.

This increased emphasis on quality by users will further increase audit firms’ focus on driving further improvements in the key area of audit quality, according to the FRC. 

The FRC’s executive director of Supervision Sarah Rapson said: “Stakeholders have been clear there is a need for concise and comparable audit quality indicators to improve transparency and drive audit quality improvements.

“Greater transparency and comparability will further help to shine a light on firms’ efforts to deliver high quality audit.  We welcome stakeholders’ further views on what indicators will most assist in driving the audit quality conversation between users and the firms.”

Heather Sandlin writes in Accountancy Today

The UK unemployment rate is close to a 50-year low point, having dropped by 0.2% to 3.8% for February to April 2022, and those unemployed for up to six months increased over this three-month period, marking the largest increase since late 2020.

The number of job vacancies in March to May 2022 also rose to a new record of 1,300,000, and the rate of growth in vacancies continued to slow down

According to the Office for National Statistics, the economic inactivity rate also decreased by 0.1% to 21.3% in the quarter, largely driven by those economically inactive because they were students.

The number of job vacancies in March to May 2022 also rose to a new record of 1,300,000, and the rate of growth in vacancies continued to slow down.

ONS said that those unemployed for between 6 and 12 months also decreased to a “record low”, and those unemployed for over 12 months also continued to decrease.

Meanwhile, the UK employment rate increased by 0.2% in the quarter to 75.6%, although this is still below pre-Covid levels. All in all, the number of full-time employees increased over the quarter to a “record high”, which was partially offset by a decrease in the number of part-time employees.

ONS said the most timely estimate of payrolled employees for May 2022 shows a monthly increase, up 90,000 on the revised April 2022, to a record 29.6 million.

Additionally, growth in employees’ average total pay (including bonuses) was 6.8% and growth in regular pay (excluding bonuses) was 4.2% in February to April 2022. Growth in total pay was 0.4% but regular pay fell on the year by 2.2%.

Sam Beckett, ONS head of economic statistics, said: “Today’s figures continue to show a mixed picture for the labour market. While the number of people in employment is up again in the three months to April, the figure remains below pre-pandemic levels.

“At the same time, unemployment is close to a 50-year low point and there was a record low number of redundancies. Job vacancies are still slowly rising, too. At a new record level of 1.3 million, this is over half a million more than before the onset of the pandemic.”

She added: “The high level of bonuses continues to cushion the effects of rising prices on total earnings for some workers, but if you exclude bonuses, pay in real terms is falling at its fastest rate in over a decade

This article appeared Accountancy Today

Most employers have recognised a skills shortage in their workforce, or expect to have shortages in the next five years, according to new research from PwC. 

The firm found that concerns around skills shortages were “profound”, with 33% experiencing a current shortage in core business skills such as teamwork, leadership, relationship-building and communication skills, while a further 41% expected to have shortages in the year ahead. 

According to PwC, there is also a “real need” for capacity building for the net zero transition as over three quarters (76%) of employers already have a shortage of the skills needed to support the transition to net zero or expect to within the next 12 months (36% and 40%, respectively). 

Nonetheless, it found that employers generally showed “broad positivity” about the education system, with around 70% of respondents agreeing that it prepares young people well for work, life, and to work at organisations like theirs. 

Employers were more divided on potential curriculum changes that would better serve the needs of their organisation, however, while 21% ranked young people getting more practical work experience as the curriculum change that would have the greatest impact. 

Weaving digital skills throughout all subjects followed, ranking first for 17%. A greater focus on career options, greater focus on practical application of subjects, and making Maths and English compulsory followed – each were first choice for around 12-13% of respondents. 

Only 5% of respondents ranked employers having more input in the curriculum as the most impactful potential change. 

Employers were broadly satisfied with the current assessment system, with almost 70% agreeing the current system helps young people to develop both social skills and problem solving / independent thinking. 

Around two thirds (65%) thought assessments prepared young people for the type of work their organisation does and 73% thought it accurately tests academic ability. 

When asked what would be the top benefit of reimagining education to better meet their organisations needs, one in five (19%) ranked being able to contribute to a more resilient UK economy or being able to contribute to a more socially inclusive UK economy as the top-ranking benefit. 

PwC said it was clear that employers “have a huge appetite for clarity and collaboration on pathways from education to employment”, with 87% saying their organisation would benefit, and 85% saying employers and education providers should work together on this.

Kevin Ellis, chairman and senior partner at PwC UK, said: “Exams have their place but they can be unduly influenced by someone’s background and the opportunities given to them. They’re not the best measure of potential. Employers will miss out on talent if they measure it through one lens alone. Assessment needs to be more inclusive.

“Basic numeracy and literacy should be a given. We also need other skills that stand the test of time, such as empathy, resilience and agility. You can’t predict all the jobs that will exist in the future but you can predict the mindset needed to adapt and be ready.”

Writes Heather Sandlin in Accountancy Today(Edited)