Kwasi Kwarteng

In the government’s response to an earlier consultation on audit and corporate governance, Business Secretary Kwasi Kwarteng said new legislation will “keep the UK a world-leader in standards of corporate reporting and governance, and tackle the impact of sudden corporate collapses on small businesses and on hard-working people”.

He added that the government will “seek opportunities to reduce regulation for smaller entities caught by requirements of retained EU law where they have proved too stringent, and use the legislation that we are developing to implement them”.

The Financial Reporting Council (FRC) said the long-awaited reforms are a once-in-a-generation opportunity to ensure corporate Britain upholds the highest standards of governance and protects those stakeholders who rely on high-quality reporting.

It agrees that legislation is required to ensure the new regulator – the Audit, Reporting and Governance Authority (ARGA) – has the powers it needs to hold to account those responsible for delivering improved standards of reporting and governance.

Sir Jon Thompson, CEO of the FRC, said: “The FRC welcomes the government’s response and its commitment to deliver much-needed reform.

“It was pleasing to see during the consultation process overwhelming stakeholder support for the creation of ARGA with strengthened powers to ensure investors, employees, pensioners and suppliers are better protected against the consequences of corporate failure.

“The government’s decision not to pursue the introduction of a version of the Sarbanes-Oxley reporting regime is, the FRC believes a missed opportunity, to improve internal controls in a proportionate, UK-specific manner. We know that well-run companies contribute to a stronger, healthier economy overall.

“While we await the final piece of the legislative jigsaw, the FRC will continue to do all in our power to ensure that audit and corporate reporting standards remain high to ensure better outcomes for stakeholders.”