Government Falters on Carillion Audit Reforms, a Blow to Trust in Financial Reporting
A much-needed overhaul of audit regulation is now on life support after eight years of inaction, following the collapse of construction giant Carillion in 2018. The bill aimed to reform the audit market was ditched by ministers who instead opted for a pro-growth agenda that fails to address the root causes of the crisis.
The government's handling of the situation is riddled with excuses, from insufficient parliamentary time to an assertion that the need for major reform has diminished. However, the outcome appears to be a case of short-term memory syndrome. The collapse of Carillion prompted widespread agreement that audit regulation needed upgrading, with 3,000 employees losing their jobs and the government needing to spend £150m to maintain basic services.
The fallout from the disaster continues, with KPMG facing a record fine from the Financial Reporting Council (FRC) and two ex-Carillion directors being fined recently. In contrast, the proposed reforms would have introduced stricter powers for the regulator and strengthened its ability to hold accountable those responsible.
It is now unclear whether even the FRC will be given statutory status, despite promises of action when parliamentary time allows. The failure to resuscitate other key proposals, such as introducing a tighter regulatory auditing system for large private companies or giving regulators greater powers to hold directors accountable, has raised concerns about the government's commitment to reform.
The UK's delayed response echoes the US experience following the Enron scandal in 2001. Just one year later, the Sarbanes-Oxley Act was passed, rearming regulators and introducing criminal penalties for corporate misreporting. In contrast, the "Carillion moment" of 2018 has seen an eight-year stalemate, with only the bare minimum of statutory powers potentially being added to some other financial bill.
The government's inaction on this issue raises concerns about trust in financial reporting, which is essential for investors and businesses alike. A review by Sir John Kingman in 2021 proposed a new regulator with stiffer powers and a broader remit, but it remains unclear if Labour will revive the plan either.
A much-needed overhaul of audit regulation is now on life support after eight years of inaction, following the collapse of construction giant Carillion in 2018. The bill aimed to reform the audit market was ditched by ministers who instead opted for a pro-growth agenda that fails to address the root causes of the crisis.
The government's handling of the situation is riddled with excuses, from insufficient parliamentary time to an assertion that the need for major reform has diminished. However, the outcome appears to be a case of short-term memory syndrome. The collapse of Carillion prompted widespread agreement that audit regulation needed upgrading, with 3,000 employees losing their jobs and the government needing to spend £150m to maintain basic services.
The fallout from the disaster continues, with KPMG facing a record fine from the Financial Reporting Council (FRC) and two ex-Carillion directors being fined recently. In contrast, the proposed reforms would have introduced stricter powers for the regulator and strengthened its ability to hold accountable those responsible.
It is now unclear whether even the FRC will be given statutory status, despite promises of action when parliamentary time allows. The failure to resuscitate other key proposals, such as introducing a tighter regulatory auditing system for large private companies or giving regulators greater powers to hold directors accountable, has raised concerns about the government's commitment to reform.
The UK's delayed response echoes the US experience following the Enron scandal in 2001. Just one year later, the Sarbanes-Oxley Act was passed, rearming regulators and introducing criminal penalties for corporate misreporting. In contrast, the "Carillion moment" of 2018 has seen an eight-year stalemate, with only the bare minimum of statutory powers potentially being added to some other financial bill.
The government's inaction on this issue raises concerns about trust in financial reporting, which is essential for investors and businesses alike. A review by Sir John Kingman in 2021 proposed a new regulator with stiffer powers and a broader remit, but it remains unclear if Labour will revive the plan either.
The government's inaction on audit reforms is super concerning 
. I think they're avoiding the real issues that led to Carillion's collapse 
. We all agree something needed changing, but instead of addressing those problems, they went with a pro-growth agenda 
. It's like they forgot about the 3,000 employees who lost their jobs or the £150m they had to spend on basic services 
.
. If they don't give regulators more power, how can we trust financial reporting? 
The US did it with the Sarbanes-Oxley Act 14 years after Enron 
. We need stronger accountability and stricter auditing systems 
. It's not just about carillon, it's about rebuilding trust in the system 
.
. We should be learning from past mistakes and making real changes, but instead we're stuck with minimal reforms 
. Let's hope someone with more courage comes along to revive this issue 
.
. It's like they're trying to put out fires instead of building up strong foundations, you know? The Carillion audit reform bill was a good idea that got shot down because of short-term thinking... it's just so frustrating 
. I remember the Enron scandal in 2001 and how quickly Congress acted on it 
. Now, here we are, eight years later, with nothing to show for it. It's like they're trying to fool us into thinking everything is fine when it's really not 
. And what really gets me is that the government keeps saying "parliamentary time" as an excuse, but I think it's just a cop-out... they should be using that time to actually make things happen 
.
I cant believe what's happenin here. The gov has been sayin one thing and doin another for years now. Theyre more worried about growin the economy than fixin the problem. 3k employees lost their jobs, £150m spent to keep services goin... thats not a good look for 'em. KPMG got slammed with a record fine and directors gettin fined too, but what about the gov's accountability? Theyre just talkin about introduce more powers to the FRC, but its all so vague. When's it gonna happen? 
. I mean, I get it, politics is all about compromise, but come on! The government just blows off a chance to make audit regulations better, when they should be focusing on giving regulators more powers to hold companies accountable 
... can't believe what's going on here. It's like they're just messing around while thousands of people lost their jobs and £150m was wasted trying to keep everything from collapsing 
. And now, KPMG is getting roasted for a record fine 
... sounds like the system is already broken. I mean, who needs reforms when you can just slap some extra powers on an existing regulator? 
... an eight-year wait for Carillion? Unbelievable 
. Trust in financial reporting is shot, and I'm not sure when we'll see real change 
.