Letter: UK undermines investment case by watering down audit reform


It is disappointing and discouraging to read the FT article ‘Audit regulation shake-up to be dilution’ (Report, 31 May), linked to the UK government’s response to published audit reform.

While there are many provisions to comment on, the biggest disappointment is the UK’s failure to establish management certifications and audits of internal controls over financial reporting (ICFR).

At the CFA Institute, a global association of investment professionals, we have spent considerable time over the past few years responding to the UK Government’s various consultations on audit reform.

In 2019, CFAI sent a separate letter to the Department for Business, Energy and Industrial Strategy urging the UK government to implement these measures, as we have seen them operate in the US under Sarbanes. -Oxley from 2002 (known as Sarbox). These views were reiterated in 2021.

The changes in behavior brought about by the introduction of management certifications and ICFR audits are clearly evident in the United States. We do not see the UK government’s response as ‘proportionate’ or ‘ensuring that UK capital markets remain competitive’ as some suggest. Rather the opposite.

Investors must and will simply increase the equity risk premium for investing in the UK compared to, for example, the US where such measures exist. As the world’s largest organization of professional investors – with our largest corporate member residing in the UK – we find that the UK has failed in its aim to restore confidence as well as the opportunity to improve the protection of investors.

Sandra J Peters
Senior Head, Financial Reporting and Audit Policy Advocacy, CFA Institute Fellow, UK FRC Stakeholders Insight Group; Member, US SEC Investor Advisory Committee, New York, NY, USA


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