Directors across the UK have claimed that the changes will add an unwanted burden to struggling firms and deter qualified candidates from joining boards.

On Friday, Scottish Financial News reported that the proposals intend to make directors personally liable for the accuracy of financial statements are expected to be included in a government consultation to be published in the coming weeks.

Business secretary Kwasi Kwarteng is preparing to publish proposals to overhaul the audit industry and improve the quality of company accounts.

The suggested changes to audit policy comes after three independent reviews and increasing calls for an overhaul after a string of accountancy scandals at the likes of Patisserie Valerie and Carillion.

Several prominent business figures questioned whether the changes would place an unreasonable burden on directors and protect auditors from being held accountable.

Sir Martin Sorrell, founder of advertising firm S4 Capital, said it did not make sense to “strangle initiative” at companies trying to survive the pandemic.

Charlie Mullins, chairman and founder of Pimlico Plumbers, said: “What’s the point of having auditors to sign off accounts if they’re going to make directors do porridge or pay huge fines when there’s a problem hidden in the books?

“Clearly if this comes within a mile of a statute book it’s a huge disincentive to start a business and try to add something to the economy at a time when a bit of risk-taking entrepreneurial activity is so desperately needed.”

Auditors are preparing to face a strengthened regulator following the proposed reforms, which stalled under Mr Kwarteng’s predecessor Alok Sharma. However, Mr Mullins suggested the big accountants had lobbied to shift the spotlight on to company bosses and away from their own partners.

He told The Daily Telegraph: “If you ask me, someone should look into who’s been lobbying ministers over lunch of late, since the only people I can see to benefit here are the auditors themselves.”

Sir John Parker, chairman of Pennon Group and Laing O’rourke, said directors relied on others to help run their companies. “Boards are reliant on financial control people to bring things out on the table, that’s a practical thing. To single out one group of people around the boardroom table is unfair,” he said.

He added that imposing onerous liability on individual directors could discourage strong candidates from applying for roles,. He said: “The end result could be that people who would be good, sound directors making a decision not to be on boards.”

Paul Lynam, chief executive of Secure Trust Bank, said any changes must be proportionate. He said: “The UK doesn’t want to get into a situation where the regulators are so scary and severe that the only people willing to act as directors are the reckless types with very high personal risk appetites.”

UK ministers hope that ensuring directors have “skin in the game” will improve financial reporting and controls. Michael Izza, of the ICAEW, said making directors personally liable “is going to really focus the mind on being a director of a public interest entity, as it should”.

Sir Philip Hampton, former chairman of RBS and Sainsbury’s, said change was needed because directors too often signed off accounts “with the view that if the auditors and lawyers say it’s OK, it’s OK. However, he said: “But those firms aren’t necessarily qualified to make the key business judgments. That has to be the job of directors and top management.”

As well as imposing personal liability on directors, similar to rules in the US’S Sarbanes-oxley regulations, the UK Government is also expected to consult on widening the remit of the audit regulator to cover large private companies.

The move could add significant compliance costs to firms already reeling from a combination of Covid and Brexit trade disruption.

The Institute of Directors said: “What is important right now is that we don’t place extra and unnecessary burdens on directors who are already dealing with a number of challenges posed by the pandemic, but instead work with them to improve corporate governance.” A spokesman for the body that represents directors said introducing an industry-led board to uphold standards would be “a more effective and proportionate way of enhancing director accountability”.

However, the Confederation of British Industry cautiously welcomed the proposals. Matthew Fell, chief policy director at the CBI, commented: “Improving the quality of audit to enhance public trust and investor confidence is paramount. The devil will be in the detail, but providing it is sensibly implemented then increased director accountability could be a useful mechanism for further driving up standards.”