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Business Secretary Kwasi Kwarteng put out a 232-page White Paper on audit reform for public consultation back in March. The paper suggests there will be dramatic changes to auditing and corporate governance. The consultation on the White Paper will end on Thursday.
This comes after auditors failed to raise red flags before corporate collapses such as BHS, Carillion and Patisserie Valerie.
Ministers are also looking at establishing a new audit watchdog to oversee the UK’s corporate governance code.
However, business groups have warned these reforms will suffocate companies and will stifle growth and push up costs.
The Quoted Companies Alliance – which represents small and medium-sized companies – said they were “deeply concerned” about some of the regulations.
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They said the proposals if introduced, will have a “significant negative impact on the growth of smaller companies”.
Jonathan Fisher QC of the firm Bright Line Law also hit back the reforms claiming they go “completely against” less red tape promised.
He said: “Whilst Brexit promised less red tape, these reforms go completely against that commitment.
“Accountants and auditors will be faced with additional regulatory requirements that could stifle growth as much more time will be spent meeting these new measures, which will increase the cost to clients.”
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Robin Fieth, the Building Society Association (BSA) chief executive, warned the pool of auditors prepared to work for small PIEs is already too small to continue supporting the existing number of small firms.
He added: “Such status adds extra burdens on top of arduous prudential requirements but adds little of value.
“Looking ahead this could result in a massive cost burden and significant capacity gaps at audit firms.”
Mr Fieth continued: “Now that we have left the EU there is the opportunity for a UK domestic definition of PIEs to include larger firms currently excluded and a far more proportionate approach for smaller, simpler organisations.”
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The proposals also include making directors personally liable for the accuracy of financial statements.
But concerns have been raised that the proposals could deter people from becoming company directors “if the regulatory response is disproportionate”.
David Herbinet, head of audit challenger firm Mazars, told the Telegraph: “We are calling on the regulator to be proportionate.
“It should be targeting those who are dangerously reckless as opposed to people who make a genuine mistake when trying to follow rules – mistakes happen.
Business Secretary Kwasi Kwarteng
“So be tough on the bad guys, but be more gentle on those who are trying their best but who may not always get it right.”
A spokesperson for the Department for Business, Energy and Industrial Strategy (Beis) said: “Our consultation sets out phased reforms to strengthen company reporting, accountability and audit to reduce the risk of company collapses, safeguard jobs and protect the UK’s reputation as a premier destination for investment.”
Back in January, Mr Kwarteng said the ‘white paper’ was “literally on my desk when I entered office” after taking over from Alok Sharma.
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He said: “I am keen to see that white paper actually hit the ground so that we can start a discussion.
“It’s not the be all and end all, it’s not as if we are going to be legislating next week on all the reforms, but we really have to get the ball rolling.
“There have been lots and lots of reports, we have had lots and lots of debate, but now we just need to push this thing forward.”