Delivering Audit Reform - Business Committee launch follow-up inquiry
20 March 2020
The Business, Energy and Industrial Strategy (BEIS) Committee has launched today an inquiry on Delivering Audit Reform to help map out a path for implementing meaningful reform of the UK's audit industry following a series of inquiries, from the BEIS Committee, from the CMA, from Sir Donald Brydon, and from Sir John Kingman.
In this follow-up work to their previous inquiry, the BEIS Committee intends to take oral evidence later this year from stakeholders on their response to the various audit reviews and examine how they can fit together to deliver the serious reform necessary to the UK's audit industry.
Terms of reference
The provisional target date for the submission of written evidence is currently advertised as Monday 4th May but this will be kept under review and the Committee will continue to take evidence after this date for the inquiry. The BEIS Committee welcomes evidence submissions which consider the following key questions:
- Do the proposals from the three reviews of audit fit together as a coherent package that can deliver meaningful reform?
- Which reforms can be delivered without legislation and what progress has the FRC made in implementing such reforms ahead of future legislation?
- Will the reforms proposed by the audit industry itself address the failings that were identified by the reviews and the BEIS Committee's Future of Audit Report?
- When will the Government bring forward its proposals and the necessary legislation where required?
- Will audit reform help track progress made by companies in meeting the UK's Sustainable Development Goal commitments and in particular Net Zero?
- How will audit reform fit with wider corporate governance reform?
The Committee is expecting to invite Sir Donald Brydon, Sir John Kingman, Lord Tyrie (CMA) and Sir Jon Thompson (FRC) to give evidence to the inquiry and to also hear from the Big Four & challenger Audit firms, and from investors, academics and others.
Over the last two years there have been three independent reviews of the UK's audit industry and a ‘Future of Audit' report published in April 2019 by the BEIS Committee. This activity was brought about by the shortcomings of audit, exemplified by several high-profile corporate collapses, such as Carillion and BHS, and scandals, such as Patisserie Valerie, where auditors missed a major fraud. This activity has focused on several aspects of audit including: the nature of audit itself (Brydon Review); the regulation of the audit industry (Kingman Review); competition, conflicts of interest, oversight and resilience in the audit market (Competition and Markets Authority (CMA). The BEIS Committee's Future of Audit Report examined many of these aspects of the audit industry.