UK directors will be personally responsible for the accuracy of their company’s financial statements as part of an overhaul of corporate governance and audit checks, the Financial Times reported.
Under changes due to be published next week, directors rather than boards will be held to account for companies’ accounts with fines and bans for major failures, the FT said.
Kwasi Kwarteng, recently appointed business secretary, will announce the reforms after accounting scandals at companies such as Carillion and Patisserie Valerie. The measures will also include new powers for the regulator to set and enforce standards for FTSE 350 audit committees and reporting standards for environmental and social obligations.
The government will also consult on whether to extend the definition of a “public interest entity” to include large private companies, charities and universities. Troubles at private companies such as Philip Green’s BHS and Arcadia have exposed the importance of these businesses for jobs and suppliers.
The long-awaited proposals will also require audit firms to look for fraud and abuse and for “managed share” audits that allow smaller accountancy firms to audit parts of a company’s business alongside a big four firm. This measure waters down a proposal from the competition watchdog designed to loosen the stranglehold of KPMG, PwC, Deloitte and EY on the audit market.
A UK-based senior auditor told the FT: “These are big costs for British businesses. The government needs to make sure that there are not so many constraints that it will be too expensive to do business here.”
