The collapse of Carillion six years ago opened the debate around audit and corporate governance reform. In the intervening years, ICAEW has led the discussion around what reform should look like, working with the Financial Reporting Council (FRC), successive governments and other professional bodies to shape the agenda.

When Sir Keir Starmer’s government took office at the beginning of this month (5 July), I wrote to the Prime Minister and the Business and Trade Secretary Jonathan Reynolds stressing the importance of audit and governance reform, encouraging the new government to commit to it in the King’s speech and offering ICAEW’s support in its implementation.

To see that it made the speech today, that the government has fully committed to reforming audit and corporate governance, is extremely heartening. It shows that ministers have listened to the profession and understood the value in a robust and modern corporate governance and audit regime.

The draft bill underpins the significant changes and improvements already made by the FRC, audit firms and professional bodies. The FRC has strengthened audit oversight over the past six years, while the largest audit firms have invested significantly in people, methodology and technology to improve capability and performance.

Within firms, this has included greater use of internal technical consultations, alongside the voluntary adoption of operational separation and other governance enhancements. 

ICAEW and other professional bodies have engaged with these issues to drive better audit quality through continuous improvement in ethics driven by robust CPD requirements, thought leadership on internal controls in the UK and on corporate fraud, and work with the FRC and others on professional judgement.

It confirms the establishment of the Audit, Reporting and Governance Authority (ARGA), which will replace the FRC and will have the wider remit professional bodies have called for. It will extend Public Interest Entity (PIE) status to the largest private companies, develop a more proportionate approach for smaller PIEs, and have powers to hold company directors to account for serious failures in financial reporting and audit responsibilities. While the devil is in the detail, this is extremely promising.

From the language used in the background briefing for the King’s speech, it is clear that the government has listened to ICAEW when it made its arguments for audit and corporate governance reform. It is welcome to see that the government is willing to hear from voices such as ours and others within the profession.

And there is an economic reward for taking such swift action; these reforms can help to revitalise investor confidence in the UK’s business environment. It establishes the UK as a global leader in sustainable and resilient corporate governance, well placed to transition to net zero carbon emissions. Commitment to reform demonstrates the new government is serious about improving the UK’s economic stability.

The profession and other stakeholders are supportive of audit and corporate governance reform. A regulatory environment that protects the public interest and investors, that ensures that the UK is an attractive place to do business, is very desirable. It helps to create a fair and proportionate regulatory environment. 

The UK is known internationally for strong standards of governance and accountability. Many global  institutions in accounting, governance and law have their origins in the UK. Without action on audit and corporate governance reform, this leading position could have been eroded. Instead, we are taking the first steps towards greater trust and stability in the UK economy, making it more attractive for investors and laying the foundations for greater progress on sustainability reporting and wider business resilience.

We are ready to support the government in implementing the proportionate reforms we need.