Traditionally, the King’s Speech signals the state opening of Parliament, and sets out the key policies for the incoming administration.

As ACCA sets out in our UK policy prospectus published before the election, we want the speech to include a commitment to an audit and corporate governance reform bill, to set up the new regulator, the Audit, Reporting and Governance Authority (ARGA) on a statutory footing, and to push forward the proposals on audit and corporate governance reform that were developed by the previous government.

After the post-Carillion explosion of activity (Kingman, CMA and Brydon reviews) in this area over the course of 2019-2021, audit reform has been repeatedly by Westminster over the past three years. ACCA believes that the election of the new government provides an opportunity to make real progress on a key component of making the UK an attractive place to do business: a world leading system of corporate governance, audit and regulation.

Corporate reporting

The most recent proposals from the previous government came in July 2023, when the Conservative government announced new draft regulations on corporate reporting by very large companies. These would require them to provide more information on their significant risks, on how planned dividend payments could be met out of realised profits, on the actions taken by directors to prevent or detect major fraud, and on how the company assures the quality and reliability of its corporate reporting.

The government stated that the measures “respond to lessons learned from major and sudden corporate collapses in recent years, including that of Carillion”, and that they “form part of the government’s wider audit and corporate governance plans”. These plans had, of course, been developed over an extensive period off the back of the reviews mentioned above.

The FRC noted at the time that the new requirements would strengthen transparency and accountability in business, by providing key information to investors and other stakeholders. It said that the new regulations would “boost the quality of corporate reporting and enhance the UK’s reputation for high reporting standards”. However, the government withdrew the draft regulations in October 2023, sidelining them after consultation with companies raised concerns about imposing additional reporting requirements.

In November 2023, instead, the FRC announced that it would take forward only a small number of the 18 proposals originally consulted upon, with development of the remainder stopped. And the aspiration of introducing legislation to provide a statutory footing for ARGA, five years after work on reform had commenced, remained just that: an aspiration. At the time, ACCA suggested the decision represented a backward step, which would reduce the quality of corporate reporting and diminish the UK’s reputation for high reporting standards.

January’s subsequent FRC announcement, setting out its detailed proposals, fell short of the changes many were hoping for.

Key timing

ACCA has already set out to the new Labour government that the first 100 days in office should focus on timetables for addressing key issues, including economic, fiscal and corporate governance reforms. Following the election result, there is now the chance of an energised and strong government to make many of the changes that have been discussed since 2019.

The switch from FRC to the Audit, Reporting and Governance Authority (ARGA) will be an essential part of this change, and presents a great opportunity. In our view, the government should commit to introducing draft legislation and pushing forward the reforms.

One of the biggest practical barriers to audit reform to date has been the difficulty in the face of competing priorities to find space in the parliamentary timetable to introduce legislation. Our sense from what we hear is that a lot of the hard work necessary in terms of producing draft legislation has in practice already been completed, so there should be no reason why progress now can’t be fast.

Labour’s new government will have a whole range of important and pressing priorities for its legislative plans. However, placing audit reform in their policy agenda will highlight the importance of the UK being a good place to do business by finally making real progress on audit and corporate governance policy, while putting the new regulator on a strong statutory footing.

We will continue to argue for and support improvements to corporate reporting, and to audit quality and oversight, to ensure that the UK continues to be a world leader in this important area of governance.

Mike Suffield is director, Policy and Insights at ACCA Global