At the heart of the bill, which will implement safeguards recommended by post-Enron/Worldcom reviews, are measures to tackle the reliability of financial reporting and the independence of auditors.
It requires directors to state that they have not withheld any relevant information from their auditors, requires companies to publish details of non-audit services provided by their auditors and imposes on the professional accountancy bodies independent auditing standards, monitoring and disciplinary procedures.
The bill also strengthens the role of the Financial Reporting Review Panel in enforcing good accounting and reporting, by giving it new powers to require documents and broadening its scope. And controversially it allows the Inland Revenue to pass information about suspect accounts to the FRRP.
The bill will also increase powers to investigate companies by giving investigators a new power to get relevant information from anyone and widening their document-gathering powers.
DTI minister Jacqui Smith said: ‘We want the UK to have the best system of corporate governance in the world. There is no denying that financial markets around the world have been badly shaken by the corporate failures of the last few years.
‘This Bill completes a comprehensive package of measures aimed at restoring investor confidence in corporate governance, company accounting and auditing practices here in Britain. Its aim is to raise corporate performance across the board and beyond.
‘The Bill tightens the independent regulation of the audit profession and strengthens the enforcement of company accounting, both concerns highlighted by the Enron and Worldcom scandals. It gives auditors greater powers to get the information they need to do a proper job, and increases company investigators’ powers to uncover misconduct.
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