UK MPs Urge Audit Legislation To Avoid High-Profile Collapses

U.K. lawmakers are calling for new legislation that would ensure auditors and accountants are better able to identify and call out issues within their clients’ finances as the government works to avoid more high-profile corporate collapses.

Yahoo! Finance U.K. reported on Monday (Nov. 4) that MPs say an “urgent” new law must emerge to introduce corporate finance and auditing reforms in the wake of the failures of Thomas Cook and Carillion. The policymakers warned that those collapses have not caused the corporate finance and auditing market to learn its lesson, and that cultural change “will not happen” unless a new regulator is formed with greater powers to promote accounting accuracy.

“Political pressure can and does draw attention to faults and flaws, but without regulators with the powers and resources they need, lasting cultural change will not happen,” said MP Rachel Reeves in a letter sent to business secretary Andrea Leadsom, according to reports.

She added that the U.K. government has so far failed to adequately address the issue despite its warnings sent to the auditing industry and to large corporates.

In the letter, the MPs attached a report outlining proposals for reform. Among the proposals is a call for greater diversity in the boardroom to mitigate the risks that “group think” can pose, as well as a requirement for FTSE 100 firms to release information on ethnicity pay gaps. The letter also calls for an end to the disparity of pension contributions between chief executives and their staff, as well as greater transparency into how bonuses are awarded.

Additional proposals also suggest new rules over how companies can claw back bonuses, reports said, and also recommend an entire review of how corporate insolvency is handled across the U.K.

These reforms must “mitigate against the worst impact of corporate failures on employees, consumers, suppliers and taxpayers,” the letter added.