Corporate governance and financial reporting in the UK are on the cusp of some major changes.
The introduction of the Audit Reform and Corporate Governance Bill, as announced in the King’s Speech, marks a move towards stricter regulations.
This includes the establishment of a new and more powerful watchdog, the Audit, Reporting and Governance Authority (ARGA), set to replace the Financial Reporting Council (FRC).
What a more powerful regulator means for your business
The creation of ARGA represents an overhaul aimed at addressing gaps in the regulatory framework that have allowed corporate mishaps and financial discrepancies to persist.
ARGA’s enhanced powers are designed to ensure stricter compliance and higher standards of financial reporting. Here’s what businesses need to prepare for:
Increased scrutiny and enforcement
ARGA will have greater enforcement powers, which means businesses can expect more rigorous inspections and audits.
The authority’s mandate allows it to tackle bad financial reporting more effectively.
For businesses, this means that maintaining transparency and accuracy in financial disclosures is more important than ever.
The penalties for non-compliance will be more severe, emphasising the need for stricter internal controls and compliance processes.
Proactive compliance
With ARGA’s focus on preventing corporate failures, companies are encouraged to adopt a more proactive approach to compliance.
This means regularly reviewing and updating financial reporting processes to ensure they meet the new standards.
Businesses should consider conducting internal audits more frequently and invest in training their financial teams to be up to date with the latest regulatory requirements.
Direct impact on directors
Under the new regime, directors will face increased scrutiny and direct accountability for their company’s financial reports.
If a company’s financial statements are found to be inaccurate, directors could face sanctions.
This places a higher burden on directors to ensure all financial disclosures are correct and verifiable.
Directors must now take a hands-on approach to oversee their financial reporting processes, ensuring that they meet the new, stricter standards set by ARGA.
Preparing for the change
Make sure that your directors and financial officers are aware of the changes and understand their new responsibilities.
Regular training sessions and updates on regulatory changes can help keep your team informed.
Review your current financial reporting and control systems to identify areas for improvement.
Strengthening these can help you meet the more stringent requirements.
Stay informed about any further developments regarding the audit reforms and ARGA’s role.
Regulatory frameworks can evolve, and staying ahead can give your business a competitive advantage.
While it brings with it challenges in the form of stricter regulations and greater accountability, the changes also offer an opportunity for businesses to strengthen their financial practices.
Our team can help your business prepare for these changes. Contact us now for more information.
