Reed Smith Client Alerts

The UK government is consulting on far-reaching changes to the UK's audit and corporate governance regimes, with significant consequences for the UK's largest companies and their directors and auditors, as well as for audit firms and the audit regulator.

Authors: Delphine Currie James F. Wilkinson Peter Ferrigno Edmund Tyler

The proposals are the culmination of a series of independent reviews, including the Kingman review into the UK's audit regulator, the Brydon audit regime review and a market study by the Competition and Markets Authority on the audit of FTSE 350 companies. These in turn followed on from a series of high-profile corporate failures, and ongoing concerns about the lack of competition and resilience in the audit market for the UK's largest companies.

Most of the changes are targeted at public interest entities (PIEs), a category which currently includes listed companies, banks and insurance companies, but is likely to be expanded to take in large AIM-quoted and private companies.

The consultation runs until 8 July 2021. The majority of the changes will require legislation when the Parliamentary timetable allows. The government plans to bring in the changes that do not directly impact businesses (for example, establishing the new regulator) earlier than those that will have a significant effect on wider business, which may be phased in over a longer period. So as not to discourage growth companies from listing in the UK, a grace period may also apply to newly listed companies.