Government Scraps Audit Reform Bill - What It Means for UK Businesses

The UK government has confirmed it will scrap the long-awaited Audit and Corporate Governance Reform Bill, citing concerns that the proposed changes would place additional costs and regulatory burdens on large companies.

The decision comes nearly eight years after the collapse of Carillion, an event that exposed significant weaknesses in corporate reporting, audit oversight, and director accountability and sparked years of debate around reform.

What was the Audit Reform Bill meant to do?

The proposed legislation aimed to strengthen confidence in UK business by introducing several major changes, including:

• A new definition of “public interest entities”, potentially widening the number of companies subject to tighter scrutiny

• Greater accountability for company directors, reinforcing their responsibilities for financial reporting and internal controls

• The creation of a stronger audit regulator, with enhanced powers to oversee firms and enforce standards

• Measures designed to improve audit quality, resilience, and corporate transparency
  

The government has now confirmed these measures will not move forward, saying the priority is to reduce red tape and keep compliance costs down.|

Why has the decision been criticised?

Professional bodies, including ICAEW  and others across the accountancy and governance sector, have expressed disappointment at the decision. Many argue that reform could have:

• Boosted investor confidence in UK companies

• Strengthened corporate governance standards

• Reduced the risk of future high-profile corporate failures

• Improved accountability at board and director level
  

There is concern that without formal legislative change, gaps in oversight and responsibility could remain.

What has improved since Carillion?

It’s important to note that audit standards and governance practices have improved in recent years. The audit profession has invested heavily in:

• Stronger firm governance

• Improved resilience and quality control

• Better reporting frameworks and assurance processes
  

However, many believe the Financial Reporting Council (FRC) still requires broader statutory powers to fully carry out its role as regulator.

What happens next?

While the Audit Reform Bill has been abandoned, the government has signalled continued focus on:

• Simplifying and modernising corporate reporting

• Exploring more streamlined disclosure requirements

• Potential changes to how AGMs are conducted, including virtual options

• Wider efforts to reduce administrative burdens on businesses
  

What this means for business owners and directors

For business leaders, this decision reinforces the importance of strong internal governance, transparent reporting, and proactive financial oversight, regardless of legislative change.

At SJC, Chartered Accountants, we continue to support clients with:

• Robust financial reporting and audit preparation

• Director responsibilities and governance best practice

• Risk management and compliance guidance

• Strategic advice to strengthen business confidence and credibility
  

If you’d like to discuss what this development means for your business or how to strengthen your governance and reporting frameworks, our team is here to help.