Auditory pathway

Will they or won’t they? That’s the big question as the government considers its response to a call from the Chartered Governance Institute to continue with abandoned plans for audit reform in the UK.

City AM reports that business secretary Kemi Badenoch has received a letter from the CGI’s chief executive Sara Drake, claiming the government’s “capricious abandonment” of reforms represented a “colossal waste of government time and public money” and “sent a bad signal about this government’s commitment to responsible capitalism” which left “business leaders and investors in a state of uncertainty.”

The reforms have been in development since the collapse of Carillion in 2018 and were developed in three government-commissioned reviews and a white paper.

Last year, the biggest piece of the reform, a new governance watchdog, was left out of the King’s Speech, which contains the UK government’s legislative agenda. Other plans to boost corporate disclosures, including a risk and resilience report, were ditched following lobbying from the London Stock Exchange.

Plans for beefed-up “internal controls” are going ahead through provisions in a newly revised UK Corporate Governance Code.

UK audit reform is an unresolved matter. But the government’s change of heart has caused widespread concern. The argument doesn’t appear to be over.

Outstanding account

Uncomfortable reading in the Financial Times this week, especially if you’re an executive. Susan Hawley, executive director of Spotlight on Corruption, writes that too few executives face legal consequences after a corporate scandal.

Hawley writes that august figures such as former prime minister Gordon Brown have highlighted what many view as an “accountability gap”.

She argues that even the Senior Managers and Certification Regime has produced few actions against individuals, despite regulatory action against companies.

Failing to follow through on new audit reforms is symptomatic of a reluctance to address problematic behaviour.

“By dropping corporate governance reforms and consulting on easing the senior managers regime rather than tackling the accountability gap, the UK risks going in the opposite direction. Major new corporate liability rules have been introduced, but no action has been taken to update rules for holding directors to account.” Gulp!