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AIA RESPONDS TO GOVERNMENT WHITE PAPER ON RESTORING TRUST IN AUDIT & CORPORATE GOVERNANCE

Last updated: 08 Jul 2021 10:45 Posted in: AIA

AIA’s view on the proposed reforms

AIA welcomes the Government’s determination to strengthen the UK’s audit and corporate governance framework. Ensuring the UK remains a trusted, and competitive destination for investment is key to the UK’s future success.

We also continue to recognise our own responsibilities in offering a recognised professional qualification for audit and are committed to working with stakeholders to develop and improve the profession in which we operate, as is evident from the recent review and implementation of the AIA’s new recognised professional qualification.

Whilst we support many of the consultation’s aims and the underlying desire to increase confidence in the UK by improving standards for corporate governance, reporting, and audit, we also consider that a proportionate and pragmatic response will give the greatest possible chance of supporting the government’s objectives in this regard.

The Government’s proposals present a real opportunity to build upon the experience, technical expertise, and reputation of the professional qualifications of RQBs which must be used sensibly. This would be lost with the introduction of a new corporate auditing professional body qualifying auditors and serving only to add confusion to the marketplace and restrict education of auditors. 

We continue to believe strongly in the benefits of independent and transparent regulation, however inconsistencies in the proposals risk the creation of a profession that is graded on an opaque alternative to the easily comparable merits of recognised professional qualifications and standards, which is arguably in direct contradiction to the desired outcome of the Government’s audit reform agenda. We have therefore expressed concerns where, in our opinion, the reforms proposed would weaken future audit regulation and undermine the role recognised bodies play in protecting the public interest.

AIA is supportive of the need to achieve focussed improvements to regulation, however a fundamental lack of detail around some of the proposals and inadequate assessment of the subsequent risks arising from the proposed reforms result in significant concerns.

In summary:

  • AIA supports the establishment of ARGA as a more robust regulator with the potential to take a leading role in raising audit quality. It must also ensure that it does not widen its agenda to the point where it is not operating in a balanced, proportional, and targeted way.
  • The consultation is unclear where the boundaries of ARGA's remit will be drawn and whether it could potentially overlap with other relevant regulators; it could be questioned whether the objective set for the regulator is ultimately targeted enough.
  • There is a risk that the central objectives of improving audit quality and standards of corporate reporting and governance could be overshadowed by secondary reforms, which fundamentally change the existing system of audit training and education without substantially explaining the value proposition.
  • AIA welcomes the depth of the reforms for audit, but would question whether the creation of a new professional qualification for corporate auditors would truly help in achieving the central aims of the reforms and instead result in reducing the appeal for prospective auditors entering the profession.
  • AIA would strongly urge the Government to resist implementing a system which would have the ultimate effect of ranking professional bodies based upon criteria unrelated to standards.
  • AIA welcomes the Government’s recognition of the importance of improving fraud education and has highlighted the key role Recognised Qualifying Bodies play in ensuring audit qualifications are fit for the future and adaptive to changing requirements.
Read the full consultation response
We continue to believe strongly in the benefits of independent and transparent regulation, however inconsistencies in the proposals risk the creation of a profession that is graded on an opaque alternative to the easily comparable merits of recognised professional qualifications and standards, which is arguably in direct contradiction to the desired outcome of the Government’s audit reform agenda.