‘The primary objective of UK audit reform must be to support high audit quality’ says ACCA

Department for Business, Energy & Industrial Strategy’s audit white paper includes important steps in recognising the responsibilities of all of those within the ecosystem of company conduct, reporting and oversight.

Maggie McGhee, ACCA’s executive director – governance comments on today’s publication of a new consultation from the UK government:

‘After much anticipation and speculation, we finally have clear proposals from BEIS about this important area of business reform in a post-Brexit world.

‘The role of audit is essential to bring confidence in the UK as a capital market. Audit is a vital part of a connected jigsaw that creates and sustains this confidence and trust. Other key elements, in particular the crucial roles of company directors, audit committees, and the regulator, are covered in these comprehensive proposals.

‘There’s a lot to consider here, including some important new proposals such as those for company directors and boards to be more accountable – an important step in recognising the responsibilities of all of those within the ecosystem of company conduct, reporting and oversight.  We’ll be responding to this consultation in full – but our immediate reaction is to welcome the depth and breadth of what is being proposed.’

Maggie McGhee considers the following four proposals:

Big Four

‘Whilst we strongly support the objective of opening up the audit market to address the dominance of the ‘Big Four’, we will look carefully at the detail of the Government’s proposals.  The primary objective of any reform of the audit market must be to support high audit quality, and we will consider the Government proposals in this context.’

ARGA and operational split

‘We have long welcomed the introduction of a new regulator, the Audit, Reporting and Governance Authority (ARGA). ARGA has already made progress on a voluntary basis in separating out audit practices from the broader firm across the ‘Big Four’. Building on this work within a statutory framework will need to be designed carefully to make sure that auditors retain the ability to access specialist expertise in an increasingly complex world, one of the key benefits of the current multi-disciplinary model.’

Directors’ and boards’ responsibilities

‘New levels of responsibility on directors and boards around detecting and preventing fraud are wide-ranging and will give ARGA extra powers well beyond what has been the norm. This is a big move, with proposals for directors of big firms to be ‘more accountable’. Whilst we are supportive in principle of extending accountability to company directors, detailed proposals should be proportionate and carefully thought through, with any potentially negative impact fully considered.’

A new audit profession

‘As we said when we responded to the Brydon review, greater clarity is needed on what’s planned for the ‘new audit profession’ – and the basis on which it will enhance the profession. The Government, ARGA, professional accountancy bodies and audit firms together have a critical role to play to ensure that the audit profession, however set up, remains attractive. It’s important to make sure that the valuable and transferable skills developed by people working in audit continue to be valued by wider business.

‘As a professional body that trains auditors, our audit and assurance exams offered as part of the Master’s level ACCA Qualification deliver the technical skills and competencies needed and we will continue to evolve these as audit itself transforms. These are offered at two levels – compulsory for Audit and Assurance, and elective for Advance Audit and Assurance for those looking to specialise as auditors.’

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Helen Thompson
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"The role of audit is essential to bring confidence in the UK as a capital market. Audit is a vital part of a connected jigsaw that creates and sustains this confidence and trust. Other key elements, in particular the crucial roles of company directors, audit committees, and the regulator, are covered in these comprehensive proposals."

Maggie McGhee, executive director - governance - ACCA