December 2024
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This conference discussed next steps for audit reform and corporate governance policy in the UK.
It took place as the Government prepares the draft Audit Reform and Corporate Governance Bill, which aims to launch the new Audit, Reporting and Governance Authority (ARGA) accounting regulator to replace the Financial Reporting Council. The conference brought stakeholders together with policymakers to consider the outlook for the audit market, implications for businesses and key priorities moving forward in the context of upcoming reform.
Delegates considered the scope and remit of ARGA, how to improve transparency in large companies and the accountability of directors, the effects of the updated UK Corporate Governance Code and the QCA Corporate Governance Code (2023) on stakeholders, the definition and role of public interest entities (PIEs), and protection against conflicts of interest. We also expected delegates to assess the new listing rules introduced by the FCA in July 2024 to support a wider range of companies to issue shares in the UK, looking at implications for corporate governance codes and transition arrangements, as well as implications of the new corporate criminal offence of failure to prevent fraud introduced under the Economic Crime and Corporate Transparency Act 2023.
Potential new requirements were considered, with discussion on independent assessment, strengthening risk controls and predictive risk management, and best practice for reporting. Sessions also brought out latest thinking on the handling of whistle-blowing, with data from regulators highlighting concerns over conduct and overall culture within financial services firms.
Further sessions examined key issues for audit reform, with discussion on priorities for ARGA, including minimising the risk of major company collapses, as well as the future for the audit market and supporting the UK’s reputation as an investment destination. We also expected discussion on the growing role of sustainability auditing and implications for the audit market.
Delegates also considered implications for financial reporting and governance of measures in the Budget, as well as the impact of the recently passed Budget Responsibility Act 2024, which aims to ensure that the Government’s major fiscal announcements are subjected to an independent assessment by the OBR.
Sessions also included discussion on latest developments and next steps for use of technology to advance risk management and tackle regulatory arbitrage. Further discussion looked at strengthening audit market resilience, including recommendations made by regulators in their inspections reports, and whether these are being implemented effectively.
We are pleased to have been able to include keynote sessions with: Matilda Curtis, Deputy Director, Audit Reform, DBT; Prof Luca Enriques, Professor, Corporate Law, University of Oxford; Gavin Hayes, Head, Policy and Public Affairs, CIIA; Paul Lee, Head, Stewardship and Sustainable Investment Strategy, Redington; and former Secretariat Member, Brydon Review of the Quality and Effectiveness of Audit; and Prof Peter Pope, Professor Emeritus in Accounting, LSE.
Overall, areas for discussion included:
- policy: assessing the new Government’s approach to corporate governance and scrutiny
- reform:
- establishment of ARGA with expanded powers to investigate and sanction directors - priorities for set-up and operation - implications for audit quality and corporate governance
- what is needed for the oversight authority to be effective in supporting governing bodies, employers and employees - relationships and collaboration with other institutions
- accountability: enhancing transparency in large companies - extending PIE status to major private companies - balancing regulatory requirements with operational flexibility for smaller entities
- risk and governance:
- strengthening corporate governance frameworks - incorporation of predictive risk management and whistleblowing strategies
- clarity on roles and responsibilities across the range of corporate entities - improving internal controls
- the audit market: oversight and supporting resilience - strategies to prevent conflicts of interest within audit firms - tackling variation in audit quality across sectors
- scrutiny: potential impact of the Budget Responsibility Act 2024 - priorities for the OBR moving forward - implications for corporate financial planning and forecasting
- reporting: integration of sustainability and wider ESG considerations - alignment of corporate governance with decarbonisation goals - addressing challenges in adapting to digital transformation - the sustainability assurance market
- regulation: FCA and PRA capacity post-inquiry - balancing growth and competitiveness objectives with robust regulatory frameworks - priorities for maintaining UK financial sector attractiveness
- corporate culture: assessing whistleblowing frameworks - improving corporate culture and ethical standards - potential legislative reforms to enhance whistleblower protections
All delegates were able to contribute to the output of the conference, which will be shared with parliamentary, ministerial, departmental and regulatory offices, and more widely. This includes the full proceedings and additional articles submitted by delegates. As well as key stakeholders, those that attended include officials from HM Treasury; HMRC; DfC, NI; DBT; DfE, NI; NAO; DoE, NI; ORR; and The Scottish Government.
