The Government has today revealed plans to overhaul the insolvency and audit regime following a series of high-profile company failures.
Led by the Department for Business, Energy & Industrial Strategy (BEIS), the new rules aim to “restore trust in audit and corporate governance”.
According to the proposals, the wide-ranging reforms will affect how companies report on their governance and finances and introduce new requirements such as reporting on fraud, resilience, and climate change targets.
As part of these plans, company directors will become responsible for the accuracy of their company’s financial statements, as well as the liability for major failures.
As previously reported, the new rules will also see the ‘Big Four’ accountancy firms broken up into separate auditing and consultancy businesses to improve standards in the professional services sector. In addition, large companies would be required to use a smaller “challenger firm” to conduct a “meaningful portion of their annual audit” to further reduce the dominance of the ‘Big Four’ firms.
The existing regulator, the Financial Reporting Council (FRC), will also be dismantled and replaced by a new body, known as the Audit, Reporting and Governance Authority (ARGA), and be granted new powers to investigate and start enforcement actions against companies which fail to meet the new requirements.
Commenting on the reforms, Business Secretary Kwasi Kwarteng said: “By restoring trust in our corporate governance regime and encouraging greater transparency, we will provide investors with clarity and certainty, cement the UK’s position as the best place in the world to do business, and protect jobs across the country.”
The announcement comes after the high-profile collapses of corporations such as Carillion, Thomas Cook, and BHS, which resulted in severe job losses and huge taxpayer bailouts.
To learn more about the reforms, please click here.
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