As reported earlier this month, the Chartered Institute of Internal Auditors has led the coordination of an influential cross-party alliance of sixty-six MPs and peers from eight political parties and all corners of the UK. Together, they signed a letter to the prime minister urging the government to prioritise the long-awaited audit reform and corporate governance bill, which was announced in last year’s King’s Speech but has yet to be published.

We decided to organise this intervention after it emerged in July that publication of the draft bill had been delayed once again. We aim to increase pressure on the new secretary of state for business and trade and his ministerial team to take decisive action and put a stop to the cycle of delay and the persistent can-kicking that has come to characterise the department’s approach to audit reform so far.

Strength in numbers

This legislation is vital to placing the UK’s audit regulator, the Financial Reporting Council, on a statutory footing. It would equip it with the powers needed to hold audit firms and company directors to account for corporate failures linked to poor audits and weak governance. The need for reform has been made clear by a series of high-profile corporate collapses that have exposed serious shortcomings. As the signatories to our letter rightly argue, repeated failures tied to poor audits represent “the polar opposite of economic growth”.

The reality is that the absence of meaningful audit and corporate governance reform is undermining the UK’s economic growth potential. In recent years, we’ve seen a succession of corporate failures—BHS, Carillion, Thomas Cook, Patisserie Valerie, Greensill Finance, Bulb, ISG and Wilko—all linked, to varying degrees, to poor external audits and weak governance.

Notably, many of these companies also lacked an internal audit function, and some didn’t even have an audit committee. These failures stand in stark contrast to the government’s growth ambitions and highlight the damage caused when companies collapse owing to shortcomings that tighter regulatory oversight—and more robust internal audit, external audit, and governance arrangements—might have prevented.

These corporate failures have had a devastating ripple effect, costing jobs, pensions, and hitting smaller businesses across supply chains. Some have left a lasting scar on our high streets and town centres, with thousands of store closures. The collapse of Carillion and ISG even disrupted the delivery of vital public infrastructure, delaying or halting the construction of schools, hospitals and prisons. While audit reform may not be seen as a doorstep issue, its continued delay—and the government’s failure to act swiftly—will potentially have a damaging impact on both our economy and our communities.

We are deeply concerned that, without swift action to prioritise the audit reform and corporate governance bill in Parliament, the risk of further corporate collapses remains very real. The collapse of construction firm ISG last year is a case in point. At the time it entered administration, ISG reportedly held £1 billion in public sector contracts, underscoring the troubling reality that—almost eight years on from Carillion—lessons have still not been learnt.

The Financial Reporting Council has since launched an investigation into ISG’s statutory audits. In addition, research by the Chartered Institute of Internal Auditors revealed that the company did not have an internal audit function in place, which raises serious questions about whether the board and senior management were receiving sufficient independent assurance on their business-critical risks.

Updating governance

Alongside progressing the audit reform and corporate governance bill, the government must also act on the outcome of its review of non-financial reporting requirements. These reforms, which are expected to be delivered through secondary legislation, are essential to achieving a modernised corporate governance framework. Yet here, too, we remain in limbo, still waiting for the proposals to be published.

Key reforms we support include requiring large public and private companies—defined as public interest entities under a broadened definition—to publish an audit and assurance policy and a resilience statement. These proposals, originally set out by the previous government, would ensure that companies explain how they obtain assurance over the effectiveness of their internal controls, including whether they have an internal audit function and how they plan to strengthen it.

As demonstrated by our recent letter to the prime minister, this vital legislation has the strong cross-party support it needs to pass through Parliament with minimal resistance. What’s now required is for ministers to muster the political will to make it happen. As the signatories to our letter make clear: “Where there is political will, there is a way.” And in today’s increasingly volatile geopolitical and macroeconomic environment, a robust and effective audit and corporate governance framework is not a “nice-to-have”—it is a business necessity.

Gavin Hayes is head of policy and public affairs at the Chartered Institute of Internal Auditors