UK Government Abandons Long-Planned Audit Reform Bill
•January 21, 2026
0
Why It Matters
Audit oversight is central to investor confidence and corporate stability; abandoning the bill could stall progress on strengthening audit quality and board responsibility in the UK. With global governance standards tightening, the decision highlights the tension between regulatory ambition and economic competitiveness, making the future of UK audit reform a critical watchpoint for businesses, investors, and policymakers.
UK Government Abandons Long-Planned Audit Reform Bill
The government of the United Kingdom has confirmed it will not proceed with the long-anticipated Audit Reform and Corporate Governance Bill, bringing to an end nearly a decade of debate over the future of audit regulation and corporate accountability in the U.K.
The decision marks a significant shift in policy following years of consultation and draft proposals that were initially prompted by a series of high-profile corporate failures, including Carillion and BHS. Successive governments had argued that reform was necessary to restore trust in audit, strengthen oversight, and modernize corporate reporting.
In a statement, the Department for Business and Trade said it had chosen not to move forward with the legislation in order to avoid imposing additional regulatory burdens on companies. Ministers said the focus would instead be on measures that support economic growth and reduce costs for business, particularly at a time of wider efforts to improve the U.K.’s competitiveness.
The proposed bill would have introduced the most substantial overhaul of audit and corporate governance regulation in decades. Central to the reforms was the planned replacement of the Financial Reporting Council (FRC) with a new statutory regulator, the Audit, Reporting and Governance Authority (ARGA), which would have had enhanced enforcement powers. The bill also sought to expand the definition of public interest entities, bringing more large private companies under stricter audit and reporting requirements.
Other proposals included new responsibilities for company directors regarding internal controls and corporate reporting, alongside measures aimed at increasing competition in the audit market, which is dominated by the largest accounting firms.
Reform Advocates Cry Foul
Supporters of the reforms argued that legislation was needed to address structural weaknesses in the audit system and to improve accountability at the board level. They maintained that voluntary measures and incremental regulatory changes were insufficient to prevent future corporate collapses or restore confidence among investors and the public.
Advocates of the proposed reforms expressed their dismay with the abandonment of the potential regulations. “It is deeply disappointing that the Government has announced it will not be proceeding with the Audit Reform Bill that it promised it would deliver in the King’s Speech,” said Anne Kiem OBE, Chief Executive of the Chartered Institute of Internal Auditors. “We urge the Government to deliver good on its promise of putting the Financial Reporting Council on a legal footing with the powers to do its job effectively and to make this a priority.”
However, critics of the bill warned that the reforms would add complexity and cost, particularly for large private companies that had not previously been subject to public-interest audit requirements. Business groups expressed concern that the proposals risked discouraging investment and increasing compliance burdens without clear evidence that audit quality would materially improve.
The government has said that progress made by the FRC through non-legislative reforms reduced the need for sweeping statutory change. In recent years, the regulator has introduced tougher supervision of audit firms, new audit quality standards, and expanded enforcement activity within its existing powers.
Reaction to the announcement has been mixed. Professional accountancy bodies and investor groups have expressed disappointment, arguing that the absence of legislation leaves unresolved issues around audit quality, market resilience, and director accountability. Some have warned that abandoning the bill risks weakening confidence in UK corporate governance at a time when international standards are becoming more demanding.
Others have welcomed the decision, describing it as a pragmatic move that avoids adding further regulation during a period of economic uncertainty. They argue that improvements to audit quality should continue through targeted regulatory action rather than broad legislative reform.
For now, the FRC will remain the UK’s audit regulator, operating without the statutory powers that would have been granted to ARGA. While the government has indicated that some elements of reform may still be pursued through guidance or secondary measures, the comprehensive overhaul originally envisaged will not go ahead in its current form.
The future of audit reform may yet return to the political agenda. Opposition parties have suggested they may revisit the issue if elected, meaning the debate over how best to regulate audit and corporate governance in the UK is unlikely to be settled permanently.
Joseph McCafferty is editor & publisher of Internal Audit 360°
The post UK Government Abandons Long-Planned Audit Reform Bill appeared first on Internal Audit 360.
0
Comments
Want to join the conversation?
Loading comments...