Politicians urge Starmer to reform audit watchdog

The Prime Minister is facing pressure from 66 MPs and Lords, representing a cross-party alliance, to prioritise the long-overdue Audit Reform and Corporate Governance Bill, initially promised last year. In July 2024, the newly elected Labour government reintroduced the Bill during the King’s Speech, aiming to transform the Financial Reporting Council (FRC) into a new regulatory body.

The Bill’s return had been anticipated since its shelving by the previous government in November 2023, which chose to focus on “growth and the UK’s competitiveness” instead. The push for a new regulatory framework follows several high-profile corporate scandals, including the collapse of major companies like BHS.

The proposed new regulator would gain enhanced powers to investigate and sanction company directors for significant failures in financial reporting and audit responsibilities. This would ensure accountability for directors presenting misleading accounts. Additionally, the Bill proposes extending Public Interest Entity (PIE) status to the largest private companies, ensuring high-quality audits and early warnings of financial issues. It also aims to eliminate “unnecessary rules” on PIEs.

Despite its reintroduction, the Bill has seen no progress, prompting over 60 Parliamentarians to express disappointment over the delay. The Chartered Institute of Internal Auditors coordinated a cross-party letter to Keir Starmer, asserting that the “case for reform is now more pressing than ever.”

Signatories of the letter include Labour’s Clive Betts MP, Conservative Sir Geoffrey Clifton-Brown MP, Liberal Democrat Daisy Cooper MP, and Green Party’s Siân Berry MP. The letter highlighted that over seven years have passed since Carillion’s collapse, yet no legislation has been enacted despite multiple independent reviews, a Government White Paper, and extensive public consultation.

The letter also pointed out further high-profile corporate failures, such as Patisserie Valerie, Bulb, Thomas Cook, Wilko, and ISG, underscoring the inadequacy of current market oversight. The politicians emphasised the devastating impact of corporate collapses due to audit and governance failings on jobs, pensions, and smaller businesses within supply chains, warning that such outcomes are contrary to economic growth.

The letter urged the government to act promptly, stressing the strong cross-party support for the Bill and calling for its prioritisation through Parliament. This appeal follows a significant reshuffle within Starmer’s team, including the dismissal of ministers after Angela Rayner’s resignation amid a tax scandal.