The Audit Reform and Corporate Governance Bill was due to come into force this year. This would have been a package of measures, including a new definition of public interest entity, powers over all company directors for corporate reporting responsibilities and the creation of a new regulator with stronger powers. 

However, its scrapping does not mean the end of changes to the broader regulatory framework for professional services. Sophie Wales, Director of Regulatory Policy at ICAEW, outlines some of the changes coming this year. 

Statutory footing for the FRC

One of the big changes in the proposed Bill was that it would turn the Financial Reporting Council (FRC) into a bigger regulator called the Audit and Reporting Governance Authority (ARGA). The scrapping of the Bill means that ARGA is no longer expected to be created.

However, the government is still planning to put the FRC on a ‘statutory footing’, according to Wales. “We’re not entirely clear what that means, so we’re awaiting further information from government to understand what this means for ICAEW as an audit regulator, and then in turn, what does it mean for our firms and for our members?” says Wales. 

Delays to further reform 

While some changes are still expected, there is a lot of uncertainty about other elements of audit reform. This includes the regulation of insolvency. 

While insolvency is currently regulated on an individual basis, there have been calls for it to move to being regulated on a firm first basis, in line with other areas. The scrapping of the Bill means these changes will be delayed, though Wales says it will likely still happen at some stage.

Anti-money laundering 

There are also changes coming to the supervision of anti-money laundering, with professional bodies losing their role as supervisors for the AML regime. “We were disappointed to find [this] out,” says Wales. “At the moment, we supervise our members for this and it’s a big part of our regulatory work.”

Instead of this arrangement, all AML supervision for accountants and lawyers will move to the Financial Conduct Authority (FCA). “We’re liaising with government to understand: what does this mean? How can we support that transition and support our members throughout that process?” says Wales. 

Tax changes

There are also expected changes coming to the regulation of tax advisers this spring. While the government has decided not to create an independent body to regulate the tax profession, and will not mandate that those giving tax advice be part of a professional body, they are stipulating that tax advisers should register with HMRC.

In addition, a strengthened penalty regime for tax adviser conduct is being introduced. This, Wales says, will result in stricter penalties for advisers who do something with an intention to cause a tax loss, including potentially paying part of their client’s underpaid tax.

Local audit

In the autumn, the new Local Audit Office is expected to be established. As part of this reform to the local audit system, ICAEW will be the new External Registration Body, overseeing local audit work.

Wales suggests that this newly reformed system might mean firms that are currently not in the local audit market might want to consider whether this is an area they expand into.

Looking ahead

While there are no immediate actions for firms, Wales says it’s important to stay informed on all these changes to understand how they will impact firms going forward.