UK Audit Reform Bill Scrapped: What Finance Directors need to know
Andrew Moyser · Posted on: January 27th 2026 · read
Gone but not forgotten.
The UK Audit and Corporate Governance Reform Bill was conceived following a series of high-profile business collapses, most notably Carillion in 2018. These failures exposed weaknesses in audit quality, corporate governance and regulatory oversight, and prompted calls for a more robust, risk-sensitive audit regime.
The Bill aimed to address these issues by strengthening the audit regulator, expanding the scope of Public Interest Entities (PIEs), increasing directors’ accountability for financial reporting, and encouraging greater competition in the audit market.
Central to the proposed Bill was the replacement of the Financial Reporting Council (FRC) with a more powerful Audit, Reporting and Governance Authority (ARGA). Alongside the broader definition of PIEs, this would have captured large companies whose failure could have significant economic or social consequences.
Why the reform agenda stalled
In January 2026, after years of delay, the UK government formally scrapped the Bill. Ministers cited several reasons: concerns the Bill would impose significant additional costs on large companies, a desire to prioritise economic growth and reduce regulatory burdens, a belief that audit quality has improved since previous corporate failures, and pressure on parliamentary time.
"While the UK Audit Reform Bill has been scrapped, regulatory scrutiny has not eased. Audit expectations, inspection intensity and enforcement activity remain high, particularly for larger and higher risk businesses. Directors and finance teams should not expect audits to become less challenging or less costly as a result of this decision. Instead, FDs should focus on deriving genuine value from a well-managed audit rather than viewing it as a compliance exercise to be endured."
What the decision changes – and what it doesn’t
As a consequence, the expansion of the PIE regime will not proceed. PIE status will remain largely confined to listed companies, banks, insurers and a small number of other entities. Many large private companies with PIE-like characteristics will continue to exist outside the highest levels of audit scrutiny and governance requirements.
Other elements of the reform have been downgraded or shelved in favour of deregulation and reporting simplicity, although the FRC will still be placed on a statutory footing.
Concerns raised by investors and governance bodies
The decision has attracted criticism from investors, pension funds, and governance experts who claim it leaves gaps in the audit framework, weakens incentives for audit market competition, and risks undermining confidence in UK financial reporting. There are also concerns that without stronger, enforceable duties relating to internal controls and risk management, problems may continue to be identified too late, and when damage has already happened.
What this means for finance directors
For finance directors, however, the critical point is this: audit scrutiny will not be going away. Even without legislative reform, auditors remain under intense regulatory, professional and reputational pressure to raise standards, challenge management judgement, and evidence conclusions robustly. Expectations regarding documentation, controls, estimates, and governance are continuing to rise.
With this in mind, the most effective response is not to endure auditing as an annual compliance exercise, but to actively manage it as a strategic process. Well-conducted audits are built on early planning, clear ownership, high-quality documentation regarding key judgements, and proactive, open engagement with auditors throughout the year. This approach reduces surprises, avoids late-stage overruns, and limits disruption amongst financial teams.
Most importantly, an actively managed audit can generate real value. Constructive challenge can sharpen judgement, improve controls, and provide real insights into risk, resilience and financial reporting quality. In an environment where formal reform has stalled, but scrutiny remains, finance directors who take control of the audit process will be best-placed to drive efficiency, protect credibility, and extract meaningful insight.
