TheCorporateCounsel.net

Last week, the UK government announced that it will “revamp the UK’s corporate reporting and audit regime through a new regulator, greater accountability for big business and by addressing the dominance of the Big Four audit firms.” Similar to the circumstances that led to the Sarbanes-Oxley Act in the United States 20 years ago this summer, the UK government is reacting to a series of recent corporate meltdowns. The announcement notes:

The Financial Reporting Council (FRC) will be replaced by a new, stronger regulator – the Audit, Reporting and Governance Authority (ARGA) – with tougher enforcement powers and funded by a levy on industry. Work on this has already begun, with the Business Secretary today acting to enable the regulator to ban failing auditors from reviewing large companies’ accounts.

For the first time, the largest private companies – not just those listed on the stock exchange – will come under the scope of the regulator, reflecting the impact they have on the wider economy.

Further, the UK government notes that in an effort “to curtail the unhealthy dominance of the ‘Big Four’ audit firms, FTSE350 companies will be required to conduct part of their audit with a challenger firm.” ARGA will also be given the the power to force big audit firms keep their audit and non-audit functions operationally separate.

– Dave Lynn