Chartered accountancy body ICAEW has today published a new paper aimed at taking forward the role of reporting accountants in initial public offerings (IPOs) and other transactions on the UK’s capital markets.

The paper considers how the reporting accountant’s independent assurance work, which is a critical driver of investor confidence during IPOs, must evolve to better support economic growth and the competitiveness of the UK’s capital markets.

The Institute is seeking views from regulators, policymakers, capital market stakeholders and advisers, investors and businesses on how its members can best adapt within a changing ecosystem without compromising the credibility or stability of the markets.

The paper has been published amid a changing regulatory landscape, with revisions to UK listing rules, changes to prospectus requirements and recent updates to both the UK Corporate Governance Code and guidance from the Financial Conduct Authority (FCA).

These changes are also intended to smooth the route for more diverse companies with high growth potential to go public, as the government has sought to make London a more attractive place to list.

Iain Wright, Chief Policy and Communications Officer, ICAEW, said:

“Independent assurance of company information is a cornerstone of trust in our capital markets. Reporting accountants play a fundamental role in maintaining investor confidence during IPOs and ensuring companies can meet their public obligations.

“Now, more than ever, investors need reliable information to make informed decisions but as the capital markets landscape evolves so must the role of our members. We hope this paper will spark constructive discussions with our stakeholders so we can agree a proportionate approach.

“Growth and economic stability are both built on foundations of investor confidence and changes must not erode this. Robust independent assurance and transparent reporting will remain a critical underpinning of this confidence and of the credibility of the UK markets overall.”

Drawing on the expertise of its members, ICAEW has suggested four principles to guide the evolution of the role of the reporting accountant. These are:

• Ensuring the work of reporting accountants is viewed holistically.
• Securing a commitment from all stakeholders to proportionate assurance processes.
• Increasing consistency between requirements before and after IPO listing.
• Improving awareness and understanding of assurance and diligence at IPO.

These principles recognise efforts to encourage rebalancing of risk appetite with due diligence, assurance and other protections, and recommend a more flexible and proportionate approach.

The paper warns of the pitfalls in reducing the extent of independent challenge. For example, companies not being ready at IPO to meet the more stringent reporting requirements on public companies, which could lead to a higher risk of restatements and profit warnings.

ENDS