UK commits to new accounting watchdog, despite delays

The UK government has pledged to push ahead with a new authority to oversee corporate governance standards, following criticism from a top business committee over its inaction to date.

In an open letter to the Business, Energy and Industrial Strategy (BEIS) committee, the government promised to push the issue to the top of the parliamentary agenda.

“We will respond with comprehensive proposals and legislation to create the new Audit, Reporting and Governance Authority as soon as Parliamentary time allows,” Martin Callanan, Minister for Climate Change and Corporate Responsibility, wrote.

The government has been forced to respond after it was recently accused of “dragging its feet” with its lack of response to findings from the BEIS committee inquiry into the collapse of Thomas Cook.

Following its conclusion, a series of recommendations were made on topics such as corporate governance, executive remuneration and audit reform. Included in this was transforming the Financial Reporting Council (FRC) into the Audit, Reporting & Governance Authority (ARGA).

However, this was nearly 12 months ago, and the government’s lack of progress has drawn criticism.

The latest government response once again committed to granting the FRC’s successor greater powers to enforce compliance with new reporting standards on executive pay and corporate governance.

However, a frustrated BEIS chair, Darren Jones MP responded that the government was showing little evidence of corporate governance reform being a priority.

“Given the importance of audit, and the fact the department already has a raft of practical audit measures sitting on its desk gathering dust, we should expect the business department to show far more urgency to help drive through the reforms.”

The BEIS is not alone in its criticism of the government and in a House of Lords debate in June, Sharon Bowles said there was “still so much ​more about the unsatisfactory past of the FRC that could come out.”

“It is constantly dribbling out,” the LibDem peer said. “It will taint ARGA if it is perceived as just the FRC by a new name, which is what the delay is doing.”

At the same time, the FRC says it is still waiting for legislation to allow it to fully transform.

In its annual report, former chair Simon Dingemans said more resources and stronger powers were needed to ensure a successful transformation.

“To deliver on a number of the key recommendations for reform, the government needs to legislate, to strengthen powers and put the FRC on a statutory footing, including for its funding basis, so that it can build the resources and capabilities necessary to be effective, as it transitions to the ARGA.”