Publication of the government’s response to the BEIS consultation on restoring trust in audit and corporate governance is likely to be of interest to many businesses. In addition, the FRC has published a consultation on public reporting of audit firms’ firm-level audit quality indicators and updated its guidance on the strategic report.
Audit and corporate governance
The government has published its response to the March 2021 BEIS consultation paper on restoring trust in audit and corporate governance. The response outlines reforms in relation to:
- Public interest entities (PIEs).
- Directors’ accountability.
- New corporate reporting requirements.
- Supervision of corporate reporting.
- Enforcement against company directors and clawback and malus in directors’ remuneration.
- Audit purpose and scope.
- Audit committee oversight and engagement with shareholders.
- The audit market.
- Supervision of audit quality.
- The establishment and responsibilities of the new regulator: the Audit, Reporting and Governance Authority (ARGA).
While the government intends to create ARGA and equip it with its powers as soon as possible in accordance with the draft legislation announced in the Queen’s Speech on 11 May 2022, the timescale for implementation of many of the reforms is expected to stretch over several years to give market participants time to plan and prepare.
We have published Article, Audit reform: question for an accountant, which discusses preparations that companies may wish to consider in relation to the proposed audit and corporate governance reforms.
The FRC has published a consultation on the public reporting of audit firms’ firm-level audit quality indicators, which is intended to provide users of audit services and other stakeholders with a range of comparable indicators on audit quality. Responses should be received by 18 August.
The FRC has also published an updated edition of its guidance on the strategic report to reflect (among other things) the introduction of mandatory climate-related financial disclosures for certain entities, including PIEs, large private companies and LLPs. These disclosures must be made in the renamed non-financial and sustainability information statement (or Energy and Carbon Report for LLPs).
Corporate criminal liability
The Law Commission has published ten reform options for the government on how it can improve the law to ensure corporations are effectively held to account for committing serious crimes. These options include allowing conduct to be attributed to a corporation if a member of its senior management engaged in, consented to or connived in the offence and introducing an offence of failure to prevent fraud by an employee or agent.
National security and investment Act
The Secretary of State for BEIS has published and laid before Parliament the first annual report under section 61 of the National Security and Investment Act 2021 (NSI Act), covering the period from commencement (4 January 2022) to 31 March 2022. The report indicates that the government intends to publish market guidance notes giving practical advice to help businesses and advisers when dealing with the NSI Act’s requirements. BEIS has also published a Memorandum of Understanding between it and the CMA on the operation of the NSI Act.
Data protection
DCMS has published the outcome of its consultation, Data: a new direction, setting out the government’s plans to reform the UK’s data protection laws. The reforms are part of the government’s National Data Strategy and the consultation presented proposals that build upon the UK’s current regime. The upcoming Data Reform Bill will draw upon the results of the consultation.
The European Commission has published some Questions and Answers on the two sets of standard contractual clauses, which it adopted in 2021 under the General Data Protection Regulation ((EU) 2016/679), one for use between controllers and processors within the European Economic Area (EEA) and one for the transfer of personal data to countries outside the EEA.
Employment
A call for evidence has been launched by the BEIS Committee into the UK labour market, in particular whether the UK has enough workers with the right skills in the right places to do the jobs required for the economy, taking into account an ageing population, migration changes and the impact of technology. The Committee also wishes to understand whether current employment law is fit for purpose or requires reform. Responses to the call for evidence are invited by 8 July.
Acas has published findings of a hybrid working survey and guidance for employers on hybrid working. The results of the survey show that 60% of employers surveyed have seen hybrid working increase following the COVID-19 pandemic. In addition, 52% have seen an increase in staff working from home full-time.
Supply chains
DEFRA has published the government response to its December 2021 consultation on implementing due diligence requirements for forest risk commodities (such as coffee or beef) introduced under the Environment Act 2021. The requirements are intended to help tackle illegal deforestation through the UK’s international supply chain. The response confirms that the government will bring forward secondary legislation for the forest risk commodities in scope.
Dates for your diary
1 July
- New regulations allowing more healthcare professionals to sign “fit notes” come into force.
- Changes to IPO rules for patent applications with biological sequence listings come into effect.
5 July
- Mental health and wellbeing plan call for evidence closes.
- Deadline for responding to the Civil Procedure Rule Committee consultation on CPR 19 (Parties and Group Litigation).
6 July
Seminar and networking reception on UK ECM in 2022: a mid-year review and update.
11 July
Closing date for LSE consultation on amendments to its Admission and Disclosure Standards.
13 July
UK Transition Plan Taskforce consultation on its proposed sector-neutral framework for private sector transition plans closes.
22 July
Interested parties to submit written evidence to the House of Commons European Scrutiny Committee post-Brexit regulatory divergence inquiry by this date.
24 July
Deadline for UK government’s call for views to enhance security of UK data centres and cloud services.
28 July
FCA consultation on the structure of the listing regime closes.
29 July
Consultation on the International Sustainability Standards Board exposure drafts of IFRS Sustainability Disclosure Standards ends.
