68 percent of senior finance professionals from UK-listed firms believe the government should delay implementing reforms to audit and corporate governance by two years, according to a survey by audit technology firm Galvanize.
The report collated responses from 250 UK-listed companies, including 40 from FTSE 100 businesses. On average, respondents called for a two-year delay, but a third (34 percent) preferred a three-year delay to the reforms.
“With or without a delay in this reform, there’s no question that Brexit and the pandemic have already strained business and this will only add further pressure,” Keith Fenner, international managing director at Galvanize said in a statement.
The underlying reason for delay appears to be related to getting technology stacks in place. 85 percent of respondents said their organisation needed to invest more into technology to keep up with UK audit reform, anticipating that this would take more than two years to fully implement. Meanwhile two-thirds (66 percent) said they needed to improve their system of internal controls to comply with a UK version of the Sarbanes-Oxley Act (SOX) regulation.
Fenner added: “Organisations must now invest in technology to create a strong foundation of controls, leading to better visibility of risk, reduced failures, and better overall performance to help drive our collective economic recovery.”
Push on with reform, say Deloitte
The UK government’s department for Business, Energy and Industrial Strategy (BEIS) published the consultation white paper for reform of audit and corporate governance in March after reviews by the Competition and Markets Authority (CMA), Sir John Kingman and Sir Donald Brydon each recommended an overhaul after a myriad of scandals rocked the sector.
When the Brydon review was published in December 2019, there was hope that the government would quickly release their plans to shake-up audit, but the ongoing negotiations over Brexit and then the chaos brought by the pandemic appeared to bring the process to a standstill.
Now the white paper is in the middle of a 16-week consultation phase, but Paul Stephenson, managing partner for audit & assurance at Deloitte said in an email that further delay was not the right option.
“Some elements of reform can, and already have, begun – such as the operational separation of our audit business from the wider firm. Others will need greater consideration and legislative or regulatory backing.
“Given the breadth and complexity of BEIS’ proposals, it’s important that careful consideration is given to the implementation and phasing of each measure. Reform must be proportionate, concentrating on the measures that will have the greatest impact on the public interest and most effectively address the challenges the White Paper is seeking to resolve.
“There is a window of opportunity to create a successful post-Brexit legacy and underpin the attractiveness of the UK as a leading market for investors and business, particularly as we emerge from the pandemic. Effective reform of corporate governance, corporate reporting and audit are important levers in achieving this. We should therefore use this period to push on with, not delay, meaningful and proportionate change,” he said.