Corporate governance and audit reform are key areas that will lead to a change in assurance approaches. “A significant package of reform” is how Sir Jon Thompson, CEO of the FRC (Financial Reporting Council) described the important ‘Restoring trust in audit and corporate governance’.
These amends are to be shared by all involved and not just the auditor and assurance service provider:
- Investors will become more engaged in how risk is managed in the entity’s business
- Companies/pension schemes raising standards in financial risk management, governance, accounting and transparency
- External company auditors will rework their behaviour, training and qualifications
The consultation by the UK Gov closes on 8 July 2021 and seeks views on proposals to strengthen the UK’s framework for major companies and the way they are audited.
The proposals set out how:
- companies should report on their governance and finance
- reports should be audited
- audit and the audit market should change
- these should be overseen by a new regulator
The objectives of these reforms are to:
- restore public trust in the way that the UK’s largest companies are run and scrutinised
- ensure that the UK’s most significant corporate entities are governed responsibly
- empower investors, creditors, workers, and other stakeholders by giving them access to reliable and meaningful information on a company’s performance
- keep the UK’s legal frameworks for major businesses at the forefront of international best practice
The proposals respond to recommendations made by 3 independent reviews commissioned by the government in 2018:
- Sir John Kingman’s Independent review of the Financial Reporting Council
- the Competition and Market Authority’s statutory audit market study
- Sir Donald Brydon’s independent review of the quality and effectiveness of audit
The UK government has said it is in favour of companies reporting on the effectiveness of internal controls for the 800 largest companies in the UK. Other revised reports and statements may be coming that will set out the company’s views about risk up to five years ahead, new audit and assurance policy, payment practices, distributable profits; and dividends. However, this does not mean in itself other companies/pension schemes will follow this.
If you want to find out more about developing audit and assurance good practices, please contact email@example.com.