Britain to shake-up audit market after Carillion crash

Carillion

10/05/2022 11:43

By Huw Jones
    LONDON, May 10 (Reuters) - Britain set out long-awaited
plans on Tuesday for a new accounting watchdog to shake up the
audit market four years after the collapse of builder Carillion
undermined investor trust in company balance sheets.
    The government said it would propose draft legislation to
rebuild trust in audit, company reporting and corporate
governance by increasing choice in a market dominated by EY,
KPMG, PwC and Deloitte, known as the "Big Four".
    After Carillion, where 7,000 suppliers and contractors were
hit, three government-backed reviews recommended reforms,
including replacing the Financial Reporting Council accounting
regulator with a more powerful Audit, Reporting and Governance
Authority (ARGA).
    A draft bill is issued for consultation before being
formally introduced to parliament, meaning it is not yet clear
when it will become law. 
    The government said the bill will include setting up ARGA,
and increase competition through 'managed shared audits' for the
main listed companies.
    For companies audited by one of the Big Four, a smaller
'challenger' accountant such as Grant Thornton, BDO or Mazars
would audit a minority portion of the company to build up
experience in blue chip auditing.
    In 2020, every company in the FTSE 100 and 91% of the FTSE
250 were audited by one of Big Four. The plan does not go as far
as the mandatory joint auditors sought by Britain's competition
watchdog. 
    "This will improve the quality and usefulness of audit; and
boost resilience, competition, and choice in the audit market,"
the government said.
    The bill will also give ARGA "effective powers to enforce
director's financial reporting duties", meaning a version of the
tough U.S. Sarbanes-Oxley Act is now on the table to make top
company officials more directly accountable for information
given to investors.  urn:newsml:reuters.com:*:nL8N2R72G9
    The new law would also give ARGA powers to regulate
accountancy - currently done to some extent by private
professional accounting bodies - and actuaries.
    It will also reform rules for insolvency practioners and
strengthen corporate governance of firms going bust to tackle
'asset stripping'. 
   
    

 (Reporting by Huw Jones; Editing by Kate Holton)
 ((huw.jones@thomsonreuters.com; +44 207 542 3326; Reuters
Messaging: huw.jones.thomsonreuters.com@reuters.net))