This week the Government announced how it will revamp the UK’s corporate reporting and audit regime creating a new regulator, greater accountability for big business and by addressing the dominance of the Big Four accountancy firms, writes David Little, a Partner in the Corporate and Commercial department at solicitors Bishop & Sewell.
Effective corporate reporting and audit ensures investors and the public can assess the health of large companies. It is crucial to supporting confidence in businesses, encouraging investment and growth which in turn helps create jobs.
The reforms to improve the audit regime and corporate transparency will help prevent sudden large-scale collapses like Carillion and BHS, which hurt countless small businesses and led to job losses.
There are numerous reforms to catch the attention of Commercial lawyers, including the creation of Public Interest Entities (PIEs). Large unlisted companies (defined as those companies having more than 750 employees and an annual turnover in excess of £750 million) will be considered PIEs. PIEs will need to meet new transparency requirements.
The government will bring forward a new statutory regulator – called the Audit, Reporting, and Governance Authority (ARGA). This will replace the Financial Reporting Council (FRC) and will be funded by a mandatory levy on industry. It will have new powers, including to direct companies to restate their accounts without having to go to court.
The new regulator will be able to investigate and sanction directors of large companies for breaches of duties around corporate reporting and audit. In addition to this, the FRC will consult on amending the Corporate Governance Code to increase transparency around bonus clawbacks.
It’s not all plain sailing for accountants and the accountancy profession either. The new regulator will have statutory powers to oversee the professional bodies’ regulation of the accountancy profession and to investigate and sanction accountants in public interest cases relating to corporate reporting.
Click here to read the accompanying press release and here for the Government’s full response to the consultation.
David Little is a Partner in Bishop and Sewell’s Corporate & Commercial team. Should you require any further advice or assistance, please contact him quoting reference CB318 on +44 (0)20 7079 4143 or email: [email protected]
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