The Financial Reporting Council (FRC) has published a position paper setting out the next steps to reform the UK’s audit and corporate governance framework whilst it transitions to the Audit, Reporting and Governance Authority (ARGA).

The paper was published after the government response to the consultation on strengthening the UK’s corporate governance, corporate reporting and audit systems.

The document also built on the areas of the government response that fall within the FRC’s remit, providing advanced clarity for stakeholders on how the work of reform will be delivered ahead of government legislation.

The paper focused on five broad areas of reform, including revisions and additions to the existing suite of codes, standards and guidance to implement reforms, the development of new standards in shadow form, and setting expectations for the markets we regulate to drive behavioural changes ahead of statutory powers.

In particular, the position paper set out proposed changes to the UK Corporate Governance Code, which will provide a stronger framework for reporting on the effectiveness of internal controls and board responsibilities for expanded sustainability and ESG reporting, and new guidance on enhanced resilience statements and fraud reporting by directors.

Setting high-level expectations around the future supervision and monitoring activities that will flow from the proposed revisions to existing codes, standards and guidance, and the development of guidance to address key issues set out in the government response were also broad areas mentioned in the paper.

FRC CEO, Sir Jon Thompson, commented: “These long-awaited reforms are a once-in-a-generation opportunity to ensure corporate Britain upholds the highest standards of governance and protects those stakeholders who rely on high-quality reporting.

“While we await government legislation, the FRC is pressing ahead with those changes to standards and codes which will improve and enhance the UK’s audit and corporate governance framework and to lay the groundwork for the creation of ARGA.”

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