Audit Reform – Where Are We Now?

Source: See here

Headlines:

• Global Efforts to Enhance Transparency:

In June 2022, the European Union (EU) adopted new rules requiring multinational companies to disclose more tax payments, marking a significant step towards increasing transparency in corporate reporting. (Source: EU Press Release) • US Corporate Governance Debate:

A recent survey by the American Institute of Certified Public Accountants (AICPA) found that 81% of Fortune 500 companies have implemented policies to audit climate-related disclosures, "highlighting the growing importance of sustainable practices." (Source: AICPA Press Release) • Hong Kong Protests Spark Call for Audit Reform:

Hong Kong's anti-government protests have led to renewed calls for an independent audit unit to review the city's finances... as concerns over government transparency reach a boiling point. (Source: BBC News) • Switzerland's Auditing Industry Moves Towards Digitalization:

The Swiss Federal Statistical Office has announced plans to digitalize its audit processes... aiming to increase efficiency and reduce costs while maintaining the same level of quality. (Source: Swiss Public Service Media) • IPO Market Reform:

The State Council of China has proposed a new plan to reduce the complexity and costs associated with initial public offerings (IPOs), in an effort to increase transparency and facilitate more companies to go public. (Source: Xinhua News Agency) • Coalition of States Widens in UK Audit Reform Efforts:

UK Home Secretary Suella Braverman and Welsh counterpart Alun Davies have agreed on a new plan for a widened coalition to improve digital collection of tax returns and reduce audit demands for small businesses. (Source: BBC News) • Piece of 2022's Corporate Regulatory Reforms:

The United States has added influential shares of major international companies under increased scrutiny due to bridges to leadership around key publicly available audit and diligence processes.

#news

Stuart Brown of Duncan ⁘ Toplis looks through the recent history of audit reform and whether or not we're starting to see the changes take place.

The UK government has been exploring ways to  reform the audit industry for many years, in order to improve governance and restore trust in the industry.

Auditors are expected to have unwavering honesty, transparency and truthfulness throughout the audit process, and maintaining the trust of clients is vital in upholding integrity.

Over the years, there have been many suggested changes to audit rules and regulations to ensure this is the case, and we're now starting to see significant steps being taken. Here, we take a look at some of these changes and where we are now.

Back in 2018, the outcomes of the Kingman Review of the Financial Reporting Council (FRC) were welcomed by mid-tier accounting firms across the UK, as well as the recommendations of the Competition and Markets Authority (CMA) market study in 2019.

After the collapse of major entities such as Carillion and BHS, it was clear that the regulatory framework and level of competition in the industry had obvious room for improvement.

The Kingman Review outlined that the FRC was not fit for purpose, partly due to it being too close to the big four accounting firms. Not only had it recruited alumni from these firms, but it was also partly funded by organisations it was supposed to be holding to account.

Because of this, Kingman recommended that the FRC be replaced by the Audit Reporting and Governance Authority (ARGA), however, this is yet to come to fruition and there is growing frustration at how long it is taking.