Just 19% of the government’s 2022 audit reform package has been implemented in some form, according to a new report from the Centre for Public Interest Audit (CPIA). While a further 12% is pending, around 69% is now effectively discontinued following the decision not to put forward a Bill in this parliament.

The report, A decade of audit and corporate governance reform in the UK, examines the progress made since the series of independent reviews launched in the late 2010s. It assesses how far their recommendations have translated into tangible change, and where the main gaps remain.

The impact of Kingman, Brydon and the CMA     

CPIA’s report focuses on the major initiatives that shaped audit reform following high-profile corporate failures. These include the Kingman Review into audit regulation, the Competition and Markets Authority’s market study into audit competition, and the Brydon Review on the purpose and scope of audit.

Alongside these independent reviews, the report also examines the UK government’s 2021 white paper, feedback statement and ensuing policy package, which set out a wide-ranging programme of changes intended to strengthen regulation, improve audit quality and enhance corporate reporting.

CPIA reviewed each recommendation and assessed whether it had been implemented, remained pending or had reached a dead end. In doing so, it provides one of the clearest overviews yet of how reform has unfolded in practice, and where expectations have not yet been realised.

Alex Russell, Audit and Assurance Director at ICAEW welcomed the CPIA’s report, as giving a very thorough assessment of the outcomes of the various proposals. He says: “The report should help enable the government, regulators and the profession to identify what to tackle next, and importantly, how we can apply any learnings to the forthcoming Modernisation of Corporate Reporting review”.

Kingman is relatively successful

Although we still don’t have an Audit, Reporting, and Governance Authority, the Kingman Review stands out as successful relatively speaking, with more than one-third of its recommendations leading to change. Particularly in relation to the approach and culture of regulation.

The Competition and Markets Authority’s work has also had a visible impact, notably, the operational separation of audit and non-audit practices within the largest firms. By contrast, the Brydon Review has seen a much lower proportion of its recommendations implemented, with roughly one-fifth leading to progress.

Importantly, the report also reveals a substantial imbalance in how reforms have played out. Although the original proposals were broadly split between auditors, and other stakeholders (companies and directors), the implemented changes have fallen disproportionately on the audit profession. Around two-thirds of delivered reforms have affected auditors in some way, while only just over one-fifth have affected companies and directors.

Director accountability is a major gap

CPIA highlights director accountability as one of the most prominent remaining gaps. Regulatory frameworks governing auditors have strengthened in recent years. By contrast, mechanisms to hold directors accountable for failures in corporate reporting remain less clearly defined.

The report notes that corporate failures are rarely caused solely by audit shortcomings. Rather, they are typically rooted in governance, decision-making and leadership weaknesses within companies themselves. Without a comprehensive legislative package, proposals to extend regulatory oversight to company directors, particularly those who are not members of professional bodies, have not progressed as originally envisaged.

The plan for PIEs stalled

Alongside director accountability, there are several areas where reform ran out of road. One of the most significant is the definition of public interest entities (PIEs). Plans to update the definition were intended bring systemically important private companies within scope, but these changes have not been implemented. The cumulative effect of these gaps, CPIA suggests, is an uneven landscape; improvements have been made in some areas but structural weaknesses remain in others.

Improvements delivered by the profession

The CPIA identifies many improvements that have instead been delivered through regulatory action, professional leadership and market-led change. In this respect, the profession continues to play a central role in evolving corporate reporting and audit practice.

ICAEW has been actively engaged in this process, including through initiatives, such as the Auditor Reporting Lab - which brings together investors, auditors and preparers to explore how reporting can better meet the needs of users. Another example is ICAEW's recent publication, Audit and Assurance in Context: What audit committees want directors to understand, which outlines some of the expectations for directors.

The work of the profession also helped the implementation of enhanced internal controls reporting through updates to the UK Corporate Governance Code, helping to strengthen transparency and accountability at board level. Meanwhile, some of the largest UK companies started to include audit and assurance policy statements and to discuss resilience in the annual report.

These initiatives demonstrate that meaningful progress can be achieved without primary legislation, particularly with strong collaboration between regulators, professional bodies and market participants.

At the same time, CPIA’s findings underline the importance of maintaining a coherent direction of travel. Without a coordinated framework, there is a risk that reforms develop in a piecemeal fashion, creating complexity and inconsistency rather than clarity.

Reform is still ongoing

The UK’s audit and corporate governance landscape has already evolved significantly over the past decade, shaped both by policy proposals and by broader changes in business, technology and stakeholder expectations.

The challenge now is to build on the progress made while addressing the gaps that remain, particularly in relation to director accountability, the scope of corporate reporting and the definition of systemically important entities.

Maintaining trust in corporate reporting will depend on the quality of audit, and the strength and clarity of the governance framework as a whole. Focus now turns to the government’s Modernisation of Corporate Reporting consultation, which ICAEW will engage with proactively.