Scores of MPs and Lords from across the political spectrum have signed a letter calling on the government to press ahead with audit reforms promised in last year’s King’s Speech.

Co-ordinated by the Chartered Institute of Internal Auditors, 66 MPs and Lords signed the letter, which forms a direct response to news in July that draft legislation had been delayed yet again.

The letter argues that changes, under discussion since the collapse of Carillion in 2018, are “now more pressing than ever” and “essential to laying the foundations for sustainable growth and long-term economic stability”.

“It is deeply concerning that over seven years have passed since the collapse of Carillion,” the letter says, “yet no legislation has been brought forward, despite multiple independent reviews, a Government White Paper and extensive public consultation.

“In the meantime, we have witnessed further high-profile failures linked to weaknesses in audit and governance—including Patisserie Valerie, Bulb, Thomas Cook, Wilko, and ISG—making it clear that market oversight remains far from adequate.

“When companies collapse due to audit and governance failings, the consequences are devastating, impacting jobs, pensions and smaller business across supply chains.

“This is the polar opposite of economic growth.”

MPs who signed the letter include Labour MP and former economist Clive Betts, Liberal Democrat deputy leader Daisy Cooper and Conservative Bob Blackman, chair of the House of Commons back bench business committee.

Peer support

House of Lords signatories include Lord Prem Sikka, a long-time critic of audit and auditors, and Lord Howard Leigh, founder of Cavendish Partners corporate finance.

The reforms include proposals to create a new watchdog—the Audit, Reporting and Governance Authority (ARGA)—with strengthened powers and intended to subsume the current Financial Reporting Council (FRC).

There were also proposals to overhaul the audit process with the introduction of managed shared audit, a structure in which big firms would share major audits with so-called “challenger” firms.

Some reforms floated after the Carillion collapse have gone through, though not as primary legislation. Reporting on internal controls has been written into the UK’s Corporate Governance Code, updated last year.

Elsewhere, other recommended reforms—resilience reporting and disclosures on audit policy—were ditched by Rishi Sunak’s government in 2023.

Regulatory reluctance

Though audit reform was included in the King’s Speech last year, Keir Starmer’s government has sent signals that it is reluctant to impose much more regulation on business.

In July, chancellor Rachel Reeves gave her blessing to reforms that eased the burden on listed firms, making it easier to introduce dual-class shares by removing the need for sunset clauses.

Other than the King’s Speech, audit reform has received little attention except for short mentions during House of Lords debates.

In one, prompted by Lord Sikka, government spokesman Lord Leong told the Lords that a new “powered-up” regulator would have the ability to sanction company directors if their financial statements fell short of expectations.

In July, business minister Justin Madders wrote to a House of Commons committee detailing that there would be no audit reform bill in the current Parliament.

Lord Sikka responded: “There is a steady parade of audit failures as firms have failed to meet even the feather-duster requirements of the FRC.

“There is no transparency about conduct of audits. Corporate governance scandals fill the daily papers—the Post Office scandal, Grenfell, water companies, energy companies, banks, private equity, underserved executive pay, financial opacity, profit sharing etc., are just a few reminders showing that corporate elites have little regard for the spirit of the rules and welfare of stakeholders.”

While there may be those keen to see new rules, there will be other business voices cautioning government against burdening business with more regulation at a time when the economy is struggling. And so the audit reform debacle rumbles on.