Internal audit leaders have embarked on an effort to lift the quality of internal audit work, with the launch of a consultation on a new code of practice.

Drafted by the Chartered Institute of Internal Auditors, the new code will combine documents for both financial and non-financial practitioners. The hope is that, by retaining the more stringent provisions in financial services, the quality elsewhere in the economy can be raised.

The move comes after a period in which the government cancelled planned reforms to audit in the UK after lobbying by City figures.

Anne Kiem, chief executive of the institute, says: “It is crystal clear that strengthening audit and assurance is now vital. Our new Code addresses this by advocating for robust, competent and appropriately resourced internal audit functions.”

Sally Clark, chair of the committee overseeing the code review and also audit committee chair at Citibank, says: “Whether it’s supporting greater financial resilience, assessing corporate culture, or keeping companies honest on their ESG commitments, the internal audit profession needs to be bold and courageous to remain relevant and deliver value.”

Internal controls reform was one of the few areas that survived the government’s reconsidering of audit reform, a process that had been under way since the collapse of Carillion in 2018.

There had been wide ranging proposals from three government-ordered reviews touching on audit, the audit market and audit regulation.

Legislative volte-face

In October last year, the government backtracked on new reporting measures that would have seen companies report on their risk and resilience preparations, audit and assurance policy, fraud policies and distributable profits.

The measures, set to be introduced as regulation, were halted after lobbying by City figures including Julia Hoggett, chief executive of the London Stock Exchange and chair of a lobby group, the Capital Markets Industry Taskforce. Hoggett said at the time the government’s decision was “releasing” listed companies from “additional reporting burdens”.

Anne Kiem commented that the decision was a “mistake”.

The government then failed to include an audit reform bill in the King’s Speech, the UK’s legislative agenda. The bill would have created a new audit regulator with new powers.

However, a review of the UK’s Corporate Governance Code did include measures to overhaul the internal controls regime, with provisions calling on boards to monitor internal controls and publish a report, a move that may well push many companies to reinforce their internal audit teams.

Consultation on the new code is open until 8 May.