Press release: Mid-sized accounting firms support audit reform, but advise restraint on treating the industry as uniform

7 March 2021

Mid-sized accounting firm leaders are broadly supportive of impending reform of the UK audit market but advise restraint on treating the industry as uniform, according to a survey by law firm Kingsley Napley LLP.
 

In the wake of recent reports that BEIS will shortly publish concrete proposals concerning the long- anticipated reform of the UK audit regime, Kingsley Napley took soundings from a number of audit practice heads, representing firms with a UK turnover between £20-£500m, about the changes expected.

Feedback included:

  • Reform:

The overwhelming majority of leaders believe that the Public Interest Entity (PIE) audit market is in need of reform, particularly for large PIEs with many stakeholders.

  • Ring-fencing:

Most leaders believe that ring-fencing audit divisions is appropriate, but only for the top 6 firms.

  • Liability:

There were mixed views about proposals to make directors rather than boards liable for the accuracy of company financial statements. Half of respondents believe existing regulation is adequate and fear that director talent may otherwise drain.

  • Clients:

Some voiced concerns that widening the scope of PIEs to include large private businesses and charitable organisations may be unduly costly and burdensome for these clients at a time when recovering from the COVID pandemic should be the priority.

  • Red-tape:

Opinion is split on whether reforms will create more red-tape for auditors or deliver actual positive benefit in terms of audit standards.

  • Opportunity:

 

A slim majority see the reforms as representing an opportunity for mid-sized audit firms, although others remain to be convinced depending on whether BEIS reforms are tailored to firms by size.

Kingsley Napley’s Accounting Advisory Partner Julie Matheson, who specialises in regulation of accounting firms and accounting professionals, comments: 

Whilst most accounting leaders accept reform is coming, the consensus of those we spoke to is that the few large accounting firms, which primarily audit significantly sized PIEs, should be treated separately to the many firms that do not cover this market. Mid-market accounting firms would like to see a future regulatory regime that is proportional, both for their own businesses and for their audit clients.

We understand the Government intends to consult on its White Paper proposals once published and hope it will listen to the industry before embarking on a one- size-fits-all approach.

Meanwhile accounting firm leaders should start modelling the impact of potential regulatory changes so that they are well placed to respond quickly once the detail is known.” 

ENDS

For press enquiries, please contact Bell Yard Communications: BellYard@bell-yard.com

Notes to Editors

Survey details

Between 11/2/21 and 26/2/21 Kingsley Napley spoke to 11 accounting firm practice heads representing firms listed in the 5-40 range of this industry ranking (by UK fee income) https://www.accountancyage.com/rankings/top-5050-accountancy-firms-2020

The questions asked were:

  • Do you believe there is a need to reform the UK audit market?
  • Are you supportive of BEIS’s proposals to make directors, rather than boards, liable for company accounts?
  • Should audit practices be ring-fenced from non-audit groups (a) for all firms (b) only for the “Big 4” firms (c) for all firms with a turnover of >£10m?
  • Will the stronger governance promised by BEIS be a positive for the UK audit market, or will it just mean more red tape?
  • Are BEIS’s proposals an opportunity or threat for your firm?

Individual responses remain confidential.

Kingsley Napley intends to conduct a further pulse taking exercise once BEIS proposals for UK audit market reform have been published.

About Kingsley Napley

Kingsley Napley is a law firm providing advice to individuals and businesses in the following areas: employment law, private client advisory, public law, criminal defence litigation, corporate and commercial, dispute resolution, family law, medical negligence, regulatory, real estate, construction and immigration.   Kingsley Napley ranked 73 in The Lawyer’s Top 200 UK Law Firms 2020 list by revenue. 

 

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