Parliamentarians from across the political spectrum have today written to Prime Minister Rt Hon Rishi Sunak MP urging the Government to include the long-awaited Audit Reform Bill in the King’s Speech on the 7th of November.
The Government committed to publish a draft Bill in the Queen’s Speech over a year ago but has yet to do so and the legislation has been mired by delay. The Bill is needed to equip the UK’s audit regulator with new legal powers to give it the teeth it needs to hold audit firms and company directors to account when there are corporate failures.
A Parliamentary Briefing on “Why do we need an Audit Reform Bill” issued last week has revealed how corporate failures linked to audit and governance weaknesses continue to have a devastating impact on the economy.. Such failures have led to tens of thousands of job losses, damaging pensions and investors, harming suppliers, as well as tarnishing the UK’s reputation as a global leader in corporate governance and a great place to invest.
The cross-party letter has been coordinated by the Chartered Institute of Internal Auditors and signed by a group of influential House of Commons and House of Lords members.
The letter reads: “We are writing to express our strong support for the inclusion of the Audit Reform Bill in the forthcoming King’s Speech. This long-awaited legislation is vital to restoring trust in audit and corporate governance.
The need for audit reform is now urgent. In recent years we have seen a series of high-profile corporate collapses linked to audit and governance weaknesses. This includes the collapse of Carillion in January 2018, which cost thousands of people their jobs, caused delays for school and hospital building projects and cost taxpayers tens of millions of pounds. More than five years on we are deeply concerned about the pace of reform. Not least because during this time, we have seen further corporate collapses marked by audit weaknesses, including Patisserie Valerie, Thomas Cook and in recent weeks Wilko.
This is underlined by the fact that the Financial Reporting Council has found that around a quarter of the major company audits it inspects require improvement. However, for the audit regulator to have clout and transition to the new Audit, Reporting and Governance Authority, it needs to be put on a statutory footing with the legal powers to do its job effectively – this can only be delivered through primary legislation.
No Government can prevent all companies from collapsing, but it should put in place a robust audit and corporate governance framework to support boards to manage their risks effectively and promote the interests of investors. This action will help deliver greater economic resilience and serve the wider public interest.
Over four years have already passed since the Independent Review of the Financial Reporting Council, over three years have passed since the Independent Review into the Quality and Effectiveness of Audit, and it has been over one year since the Government committed to publish a draft Audit Reform Bill in the Queen’s Speech. So, given the time that has already passed, we urge you to ensure these reforms are not delayed any further by including the Audit Reform Bill in the King’s Speech.
We care about this issue because we want to see our businesses succeed and for the UK to strengthen its enviable reputation for good corporate governance and a world-leading destination for investment. Furthermore, the Audit Reform Bill has cross-party support in Parliament, so we hope we will be given the opportunity to vote on it in the next Parliamentary session.”
The letter signatories include:
- Sir Peter Bottomley MP, the Father of the House of Commons
- Richard Thomson MP, SNP Westminster Spokesperson for Business and International Trade
- Ben Lake MP, Plaid Cymru Treasury Spokesperson
- Nigel Mills MP, Work and Pensions Committee
- Mark Pawsey MP, Business and Trade Committee
- Baroness Helena Kennedy KC
- Rebecca Long-Bailey MP, former Shadow Business Secretary
- Dame Margaret Hodge MP, former Chair of the Public Accounts Committee
- Clive Betts MP, Chair of Levelling Up, Housing and Communities Committee
- Jon Cruddas MP, European Scrutiny Committee
- Lord Iain McNichol
- Lord Tim Clement-Jones CBE, Industry and Regulators Committee
- Baroness Susan Kramer, Economic Affairs Committee
- Lord Tony Berkeley
- Baroness Manzila Uddin
Anne Kiem OBE, Chief Executive of the Chartered Institute of Internal Auditors said: “The letter demonstrates strong cross-party support for including the Audit Reform Bill in the King’s Speech.
“It has now been over five years since Carillion collapsed and despite countless reviews and a White Paper, we are still waiting for Ministers to find the time to pass this much-needed legislation.
“While we wait there have been further corporate failures linked to audit and governance weaknesses including Patisserie Valerie, Thomas Cook and most recently Wilko. It is vital this Bill is voted on in the next parliamentary session and that the Government don’t kick the can down the road until after the election.”