The Government published its Response to the White Paper, ‘Restoring Trust in Audit and Corporate Governance’ on 31 May 2022. The Response stated that the reforms will be delivered by a variety of mechanisms. This includes changes already made by the regulator and by Ministerial Direction. The Government is committed to legislating when Parliamentary time allows.

The Government’s response to consultation on its reform proposals was published on 31 May 2022. This set out that reforms will be delivered by a variety of mechanisms, including changes already made by the regulator and by Ministerial Direction. The Government is committed to legislating when Parliamentary time allows.

Work is continuing towards a draft Bill on reform of audit and corporate governance, for publication in due course.

No consideration has been given to amending the response to HL4706. The Companies Act 2006 does not establish a requirement for the company to disclose its undistributable reserves. The publication referenced provides guidance for auditors when making reports required, in certain circumstances, by The Companies Act 2006. Proposals to require certain companies to disclose their distributable reserves were included in the Government’s response to Restoring trust in audit and corporate governance.

The fine imposed by the Financial Reporting Council against PWC LLP in respect of the audit of the accounts of Kier Group plc was £3.35 million, adjusted for aggravating/mitigating factors and admissions/early disposal to £1,959,750. The fine imposed against the Audit Engagement Partner, Jonathan Hook, was £90,000, adjusted for aggravating/mitigating factors and admissions/early disposal to £52,650.

As the FRC investigation was under the FRC’s Audit Enforcement Procedure, the fines are subject to the requirement in regulation 5(7) of the Statutory Auditors and Third Country Auditors Regulations 2016 that the Financial Reporting Council must pay them to the Secretary of State at BEIS for remittance to the exchequer.

The fine imposed by the Financial Reporting Council against KPMG LLP in respect of the audit of the accounts of Rolls Royce plc was £4.2 million, adjusted for admissions and early disposal to £3.375 million. The fine imposed against the Audit Engagement Partner, Anthony Sykes, was £150,000, adjusted for admissions and early disposal to £112,500.

As the FRC investigation was under the FRC’s Audit Enforcement Procedure, the fines are subject to the requirement in regulation 5(7) of the Statutory Auditors and Third Country Auditors Regulations 2016 that the Financial Reporting Council must pay them to the Secretary of State at BEIS for remittance to the exchequer.

The UK Endorsement Board secretariat provides an administrative role with no executive function so staff in the secretariat should not be subject to parliamentary questions about their previous experience. However, I can assure the noble Baroness that all members of the secretariat were recruited through fair and open competition.

The Government did not ask Mike Ashley for information in preparing its response to the previous questions. Officials contacted Mr Ashley during preparation of a response to this question and he informed officials that, to the best of his recollection, he was the KPMG audit engagement partner for years ending 31/12/2001 until 31/12/2004 inclusive.

The profile of Mike Ashley on the UK Endorsement Board website sets out his career with KPMG. A copy of the profile is attached for reference. It is a matter for the UK Endorsement Board to decide what information they include on their website.

The Government has now published its response to the consultation on ‘Restoring trust in audit and corporate governance’. It is available on GOV.UK.

The Government published its response to consultation on the Restoring Trust in Audit and Corporate Governance White Paper on 31 May.

The Government will strengthen directors’ accountability for their company’s internal controls by inviting the Financial Reporting Council to strengthen the UK Corporate Governance Code to provide for a directors’ statement about the effectiveness of the company’s internal controls, including the basis for that assessment.

The Government will also introduce a statutory requirement on large companies to publish an Audit and Assurance Policy.

The Government’s draft bill on audit, corporate governance and insolvency reform is expected to be published during the Third Session.

Information from the UK Endorsement Board website explains that Mike Ashley retired as the Partner and the Head of Quality and Risk Management of KPMG Europe LLP in September 2013, having spent about 35 years with the firm and its predecessor firm, Peat Marwick. The Government does not hold information relating to the specifics of Mr Ashley’s role at KPMG.

The UK Endorsement Board operates independently from the Government. BEIS is therefore unable to provide information relating to members of staff, including information on job history, supporting its work.

The UK Endorsement Board has been delegated powers to consider new international accounting standards for UK adoption only; it has no remit over audit policy and audit standards.

This includes an assessment of the compatibility of new standards with the requirements of the International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 No. 685 (IAS Regulations). The IAS Regulations require that “the standard meets the criteria of understandability, relevance, reliability and comparability required of the financial information needed for making economic decisions and assessing the stewardship of management.” These requirements were on-shored from EU legislation on the UK’s exit from the EU and have long been understood in the context of adoption of international accounting standards.

The UK Endorsement Board has been delegated powers to consider new international accounting standards for UK adoption only; it has no remit over audit policy and audit standards.

This includes an assessment of the compatibility of new standards with the requirements of the International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 No. 685 (IAS Regulations). The IAS Regulations require that “the standard meets the criteria of understandability, relevance, reliability and comparability required of the financial information needed for making economic decisions and assessing the stewardship of management.” These requirements were on-shored from EU legislation on the UK’s exit from the EU and have long been understood in the context of adoption of international accounting standards.

The report rightly highlights the important role that internal audit can play in helping companies to promote a positive corporate culture. The Financial Reporting Council (FRC) strengthened the UK Corporate Governance Code in 2018 to provide for company boards to assess and monitor culture, to ensure a link between culture, purpose, values and strategy, and to report on this annually. The FRC’s latest annual review of corporate governance reporting, published in November 2021, found some progress in how companies report on their culture.

Additionally, the Government has set out proposals to give the FRC’s planned successor body – the Audit, Reporting and Governance Authority – new powers to hold large companies to account for the quality and usefulness of their corporate reporting, including reporting on culture. These proposals were set out in the White Paper on ‘Restoring Trust in Audit and Corporate Governance’ in 2021. The Government will be responding to that consultation in due course.

The Chair and members of the UK Endorsement Board (UKEB) are appointed, following a fair and open recruitment process, in line with the Cabinet Office’s Governance Code for Public Appointments. Recruitment also follows criteria set by the Secretary of State in the Terms of Reference covering diversity of knowledge and skills. Due diligence checks are also carried out on all proposed Board members to ensure the appropriateness of their appointment. The UKEB members are appointed in their individual capacity, are required to act independently, and in the UK long-term public good. This entails not showing preference to special interests and/or any employing entity and professional, sectoral or organisational affiliations. UKEB Board members are required to complete a Register of Interests, available on the UKEB website.

The Financial Reporting Council (FRC) is responsible for the public oversight of statutory auditors, including investigation and sanctioning in relation to the statutory audits of Public Interest Entities and certain other entities. The FRC also provides a voluntary independent investigation and discipline scheme for matters relating to the accountancy or actuarial professions which raise important issues affecting the public interest.

There are currently no specific requirements under company law or accounting standards for financial statements to disclose the total amount of profits that are distributable. Some companies do provide these figures, but they are provided on a voluntary basis.

The text quoted in the question relates to the statement an auditor is required to make to a company under section 92 of the Companies Act 2006 when a private company re-registers as a public company. It does not establish a requirement for the company to disclose its undistributable reserves.

The Government White Paper, Restoring Trust in Audit and Corporate Governance, set out proposals to require companies, within an agreed scope, to disclose the total amount of reserves that are distributable. The Government will respond to the White Paper consultation in due course.

Monitoring of individuals, and any companies they may be associated with, for human rights abuses overseas is a matter for FCDO and HM Treasury, under the recently introduced Global Human Rights Sanctions Regulations 2020.

The UK Endorsement Board (UKEB) has been delegated powers to consider International Financial Reporting Standards (IFRS) for endorsement and adoption in the UK. This is to ensure that the financial information presented by the companies required by section 403(1) of the Companies Act 2006 to prepare their group accounts in accordance with UK-adopted international accounting standards.

The UKEB’s draft Endorsement Criteria Assessment against the adoption criteria for IFRS 17 Insurance Contracts was published for public consultation on 11 November 2021. The consultation will be open until 3 February 2022.