In 2023, KPMG took a £3.5 million fine from UK audit regulators at the Financial Reporting Council to the face for their “very bad” work on collapsed contractor Carillion, which failed in 2018, left 18,257 people without a job, and once again prompted the masses both washed and unwashed to cry out “where were the auditors!?” Considered one of the UK’s largest corporate failures, the situation prompted a deep government inquiry that naturally led to discussion about changing up audit rules to prevent such a spectacular failure from happening in the future. Or at least make it look like someone tried.
Last year, King Charles even gave audit reform a very brief shout-out in his July King’s Speech:
Fast-forward to current year and audit reform is dead. Dead dead. Deader than Carillion. Reports FT:
The Department for Business and Trade said on Tuesday it had decided “not to proceed with the Audit Reform Bill following improvements in recent years, and to prevent significant new costs for large businesses” in the latest U-turn by ministers.
The DBT added it was instead “pressing ahead with modernising corporate reporting to reduce unnecessary burdens”.
One official said ministers believed audit quality had improved sufficiently since Carillion’s failure in 2018, arguing the bill was “not the best use of our legislative time” and did not align with the government’s broader push to cut regulatory red tape.
Minister for Small Business and Economic Transformation Blair McDougall had this to say in a letter to the Chair of the parliamentary Business and Trade Committee (TLDR at the bottom of quote):
Firstly, our priority is to promote economic growth and reduce administrative burdens. While the planned reforms would be beneficial, some would increase costs on business, and it would not be right to prioritise those over more deregulatory measures. We intend to focus instead on the simplification and modernisation of corporate reporting. We want to make the UK’s reporting regime the most streamlined and proportionate in the world and will launch an ambitious consultation this year to co-design these changes with companies and investors.
Secondly, the need for major reform is less pressing than it was. A great deal of progress has been made since the collapse of Carillion in 2018. We have seen considerable improvement in the quality of audit regulation, and of audit itself, and I am committed to continued support of the measures taken by the Financial Reporting Council and the audit sector to achieve these improvements. My officials and I continue to work closely with the Financial Reporting Council to make the audit market work better, minimise the administrative burden of regulation and to support growth.
Thirdly, the Government is pursuing an ambitious legislative programme and parliamentary time is limited. We respect the time and resources of our stakeholders and therefore do not want to consult to seek further input on policies that are not likely to progress in the near future. I remain extremely grateful for the ongoing interest and engagement that we have had from businesses and other stakeholders, and from the Committee, in this work.
Nevertheless, it remains important to have effective, proportionate regulation of audit and a regulator that has the right legislative set-up to do the job. We will still look to put the Financial Reporting Council on a proper statutory footing, as soon as parliamentary time allows.
TLDR We don’t have time for this shit and it’s not that bad so who cares.
The Institute of Chartered Accountants of Scotland (ICAS) quickly churned out a statement expressing their disappointment in the news.
“This morning’s announcement that the UK Audit and Corporate Governance Reform Bill has been scrapped is deeply frustrating,” said Gail Boag, CEO at ICAS. “The whole accountancy sector and even governments themselves have agreed for years on the need for audit and corporate governance reform.
“There was recognition that better corporate governance could not only support investor confidence and therefore business growth, but also that more must be done to protect the wider impacts of corporate collapse on the public. Failures such as Carillion, BHS, Patisserie Valerie and others saw job losses and pensions massively reduced in value, demonstrating why this bill is much needed.
“There is no doubt that recent improvements and work across the sector and by the FRC have moved us on from where we were, and that the quality of audit and of corporate governance has improved. However, the issue of director accountability remains far from resolved, and there is an urgent need to clarify the scope of the FRC’s role and powers.”
No statement from the FRC yet but according to their 2026 goals published on January 14, these are the things they’ll be focusing on in the year ahead:
- underpinning investor confidence in UK plc
- reducing unnecessary burdens on business while maintaining high standards
- developing deep insight into the markets we oversee so our regulation is based on evidence and expertise
- identifying future trends and innovations to support the health of the markets we oversee
- supporting the skills and resilience of the professions we regulate
“The FRC today has changed significantly over the past decade and we welcome the confidence shown in our progress and approach,” said Richard Moriarty, Chief Executive of the FRC. “That said, we are not complacent, we recognise that we need to continue to evolve to ensure we remain fit for the future.”
See you in a couple years when the next big audit disaster hits.
