Just days after the eighth anniversary of Carillion’s collapse the government has confirmed that it is scrapping the Audit and Corporate Governance Reform Bill.

After years of anticipation of how the government would implement audit reform, the decision was revealed by the Department of Business and Trade (DBT) today (20 January) in an announcement about investment in UK tech sectors and next steps in its pledge to cut ‘red tape’.

The Bill had, among other reforms, aimed to create a new definition of public interest entity, to hold company directors to account for existing corporate reporting responsibilities and to create a new regulator with stronger powers.

According to DBT the decision to scrap the Bill was made to “avoid significant new costs" for large organisations.

A letter from the Minister for Small Business and Economic Transformation, Blair McDougall, to the Chair of the parliamentary Business and Trade Committee, has also been published and further explains the change of direction.

McDougall confirms that with the government’s key priority being to promote growth and reduce administrative burdens, that it would “not be right” to prioritise the introduction of measures that would increase costs on businesses.

“We intend to focus instead on the simplification and modernisation of corporate reporting. We want to make the UK’s reporting regime the most streamlined and proportionate in the world,” he wrote.

Another key factor in the decision, according to McDougall, was the progress in audit quality and regulation since the collapse of Carillion.

Reacting to the news ICAEW’s Chief Executive, Alan Vallance, said: "We cannot hide our disappointment that after many false dawns, the government has decided to scrap the Audit and Corporate Governance Bill. The government had itself recognised that an Audit Reform Bill would increase global investor confidence in UK companies and increase the prospects of growth."

“Nevertheless, with the changes the profession has made, audit quality and firm governance and resilience are in a very different and vastly improved place from where they were in 2018.”

Vallance continued: “The final piece in the puzzle is to give the FRC as regulator all the tools it needs to carry out its job. We offer to continue to work with the government, the Financial Reporting Council and firms to ensure these specific powers are granted and that the UK is the best place in the world to attract global investment."

McDougall’s letter indicates that movement will be made on this: “I am committed to continued support of the measures taken by the Financial Reporting Council and the audit sector to achieve these improvements... Nevertheless, it remains important to have effective, proportionate regulation of audit and a regulator that has the right legislative set-up to do the job. We will still look to put the Financial Reporting Council on a proper statutory footing, as soon as parliamentary time allows.”