It is full steam ahead on the creation of the new audit watchdog as the Labour government has unshelved the Audit Reform and Corporate Governance Bill, during the King’s Speech.
“Bills will be brought forward to strengthen audit and corporate governance, alongside pension investment,” announced King Charles in his speech today.
The long-awaited plan to drop the Financial Reporting Council (FRC) in place of the new regulator, the Audit, Reporting and Governance Authority (APGA) was shelved last November by the previous government in order to focus on “growth and the UK’s competitiveness”.
The push for a new watchdog was as a result of the many high-profile scandals over the last number of years focused on audit and reporting failures which saw big companies collapsing, including BHS.
Now, three months after APGA was due to be in place, it was revealed today that this Bill has been brought forward. However, it is not clear where the regulator will be headed up, after it was previously covered before the move was shelved that the CEO of this watchdog would be based in Birmingham.
In addition to the form of the new regulator, the draft bill also has other changes included which will form the platform of APGA.
This includes its power to investigate and sanction company directors for serious failures in relation to their financial reporting and audit responsibilities. This will mean directors will face consequences for putting forward any dodgy accounts.
The draft Bill will be extending Public Interest Entity (PIE) status to the largest private companies and thus making sure the audits of those businesses are high quality and giving early warning of financial problems. It will also remove “unnecessary rules” on PIE’s.
There will be a regime to oversee the audit market put in place, which will protect against conflicts of interest at audit firms, and build resilience so quality audit is available to all companies that need it.
The draft Bill is expected to extend and apply UK-wide.