A group of influential business leaders, including the director general of the Institute of Directors (IoD), has written to the government calling for a “strengthened audit regulator”, after reforms were this week axed following eight years of review and debate.

Government brought an end to a proposed audit reform bill, which had been triggered by the collapse of Carillion in 2018, to widespread disappointment from professional bodies, investors and business leaders.

The letter, organised by the Chartered Institute of Internal Auditors and signed by the IoD, academics and finance experts, says the cancellation of the bill “represents a significant step backwards” and is “extremely concerning”.

It adds that corporates failures such as that of Carillion, Patisserie Valerie, Thomas Cook and Wilko have had a “devastating impact on the economy”.

“If the government is serious about driving growth and delivering economic stability, it must act to prevent further avoidable failures through stronger oversight of our largest companies.

“The government has stated that it remains committed to reform and to putting the Financial Reporting Council on a statutory footing with the powers it needs to do its job effectively.

“We urge you to publish the proposals for a modernised corporate reporting framework without delay, and make it a clear priority to deliver the strengthened audit regulator.”

Strengthen numbers

One of the key proposals expected of a reform bill was the transformation of the current regulator, the Financial Reporting Council, into the ‘audit, reporting and governance authority’ (ARGA) with new powers over company directors and auditors in relation to corporate reporting and audit.

Among other proposals touted for the bill was “managed shared audit”, a measure that would have compelled Big Four audit firms to work jointly with a smaller firm on large audits.

The 11 signatories of the letter include Jonathan Geldart, director general of the IoD; Anne Kiem, chief executive of the Chartered Institute of Internal Auditors; Byron Grote, a non-executive with IHG and Inchcape and former finance director of BP; Charles Henderson, chair of the UK Shareholders’ Association; and Andrew Chambers, a professor and former specialist adviser to the House of Lords’ economic affairs select committee.

It remains unclear whether government will give the FRC new powers when it puts the watchdog on a legislative footing. And as yet there is no timetable.

Government statements point to the review of corporate disclosures aiming to streamline the content needed in annual reports.