The UK is considering holding company leaders accountable for the accuracy of their companies’ accounts. A corresponding official proposal is possible in the coming week, reported the Financial Times (FT).
The UK government is considering placing new responsibilities on directors in the form of fines or bans on certain business activities as part of its response to accounting scandals in the UK and Europe. FT cited as examples accounting problems that were uncovered at the Carillion and Patisserie Valerie companies.
FT reported that Kwasi Kwarteng, the UK trade secretary, will publish the proposals in an upcoming white paper. Kwarteng’s proposals will be more than 200 pages long, and will in some ways reflect US regulations enacted by the well-known Sarbanes-Oxley rules following the Enron accounting scandal.
The rules would also give new powers to regulators and expand the responsibilities of the audit committees of the country’s largest companies, FT reported.
One negative effect of new regulations could be the cost to companies trying to get out of pandemic restrictions, FT reported, quoting an unidentified UK audit officer as saying, “This is a high cost for UK companies. The government needs to ensure that there aren’t so many restrictions that it is too expensive to do business here. “
FT cited unidentified sources that the new proposal is unlikely to include a quarterly approval that the largest firms should employ two accounting firms at the same time.
“Strengthening our corporate governance and auditing regime will help the UK remain a world leader in corporate transparency and further develop its status as the place with the highest standards of auditing,” a government spokesman told FT.
In July, the UK’s Financial Reporting Council announced an important regulation that will come into force in 2024. The four major accounting firms – Deloitte, EY, KPMG and PwC – have to separate their auditing and advice into separate business areas. However, they are allowed to exist within the same parent company.
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