BEIS Audit & Corporate Governance Reform Update – EY views

Hywel Ball, EY UK Chair, says: “The Government’s update on audit and corporate governance reform is an important milestone, but it is disappointing the measures don’t go as far as we hoped. Three and a half years after the first independent review was published, action is now needed. 

“Further delays to legislation risk losing the momentum behind reform and shareholders, auditors and companies continue to wait for clarity on measures and timescales. The establishment of ARGA is long overdue. 

“The success of audit and corporate governance reform requires a clear roadmap and for the measures to be implemented cohesively. But it will also depend on the combined efforts of the regulator, government, investors, companies and auditors focusing on a shared goal: ensuring the UK remains an attractive and dependable place to do business. 

“Brexit, climate change, the pandemic, the war in Ukraine and other factors have all contributed to a shift in society’s expectations of business. In the absence of clarity, some companies are starting to make changes themselves. Boards and management are enhancing their governance and internal controls in anticipation of more robust requirements. Companies realise that doing so will allow them to benefit from added rigour in the way they are run and report to stakeholders – which will be welcomed by investors and wider society. However, there is a widespread concern that much of the reform agenda will be left to the UK Corporate Governance Code rather than legislation, and not all companies will step up to the mark.  

“Auditors are taking voluntary steps towards reform. At EY, we have already incorporated enhanced procedures in respect of climate and fraud risks into our audits. We are committed to delivering high quality audits and we will continue to review our strategy to ensure it is optimal for achieving this goal. We will work with all stakeholders to develop an expanded scope of audit.”