Subject. Intended to counter fraud and unreasonably high bonuses for top executives, the U.K. corporate governance and audit reform implies some changes so as to improve the financial transparency of companies, primarily, large and public interest entities. The reform is called to maintain the lucrativeness and competitiveness of the U.K. financial markets, creating a sustainable and manageable environment, which major long-term investors seek. Objectives. I review and summarize proposals set out in the reform as best-in-class practices, which may work in auditing and assurance in Russia and underlie respective changes. The reform may contribute to the auditing profession, help avoid accounting scandals and corporate failure. Methods. Studying the audit reform, I applied methods of analysis, generalization, and analogy. Results. Having analyzed the reform plan, I found valuable ideas concerning directors’ responsibilities, corporate reporting and auditing. The reform suggests that the Audit, Reporting and Governance Authority should be established. The definition of public interest entities became broader. Audit boards are now to meet additional requirements. The audit market will be overhauled by segregating auditing and consultancy units of the Big Four companies and introducing statutory audit, which should be jointly performed by major and smaller entities, and tightening audit transparency rules. Hence, top executives will be more responsible and liable for financial reporting and increased transparency of internal control and trade account settlement principles. Such proposals should be adapted to the audit regulation practice in Russia and be applied with reference to the recent legislative novels. Conclusions. The quality of audit is critical for the economy and the public, since it ensures the national credibility as a capital market. Any sustainable economy needs a comprehensive approach, which combines the audit reform and corporate governance and accounting standards reform.
Keywords: audit, audit reform, corporate governance, reporting, United Kingdom
References:
Shan Y., Walter T. Towards a Set of Design Principles for Executive Pay. Abacus, 2016, vol. 52, iss. 4, pp. 619–684. URL: Link
Kyere M., Ausloos M. Corporate Governance and Firms Financial Performance in the United Kingdom. International Journal of Finance and Economics, 2020, vol. 26, iss. 2, pp. 1871–1885. URL: Link
Kolesnikov V.V., Portnova V.M. [Activities of Big Four companies on the market of auditing services]. Uchenye zapiski Tambovskogo otdeleniya RoSMU = Scientific Notes of Tambov Branch of Russian Union of Young Scientists, 2018, no. 11, pp. 57–61. URL: Link (In Russ.)
Babatunde O.E. [The role and impact of the Big Four companies in the international market of auditing and consultancy]. Vestnik molodykh uchenykh Samarskogo gosudarstvennogo ekonomicheskogo universiteta = Bulletin of Young Scientists of Samara State University of Economics, 2016, no. 2, pp. 12–16. (In Russ.)
Indyk M. The Audit Reform and Non-Audit Services in the Light of the Big-4 Transparency Reports – The EU Perspective. Applied Economics and Finance, 2021, vol. 8, no. 1, pp. 32–49. URL: Link
Druzhilovskaya T.Yu. [Reforming Russian accounting: The history, current challenges, and prospects]. Mezhdunarodnyi bukhgalterskii uchet = International Accounting, 2021, vol. 24, iss. 5, pp. 524–547. (In Russ.) URL: Link
Emchenko L.Yu. [Foreign practices of auditing: The arrangement and conduct]. Innovatsionnaya nauka = Innovation Science, 2016. no. 8-3, pp. 95–99. URL: Link (In Russ.)
Balabina S.V. [The rotation of auditors in the Russian and UK companies]. Uspekhi sovremennoi nauki = Success of Modern Science, 2017. vol. 7, no. 4, pp. 140–142. (In Russ.)
Ghafran C., O'Sullivan N. The Impact of Audit Committee Expertise on Audit Quality: Evidence from UK Audit Fees. The British Accounting Review, 2017, vol. 49, iss. 6, pp. 578–593. URL: Link
Ivanov A.E., Sokolova N.A., Generalova N.V., Salomatina E.Yu. Gudvil: sinergeticheskaya sushchnost', otsenka, uchet, analiz [Goodwill: The synergistic substance, evaluation, accounting, analysis: a monograph]. Moscow, INFRA-M Publ., 2017, 227 p.
Susanto Y.K., Pradipta A. Corporate Governance and Audit Decision Making. Corporate Ownership & Control, 2017, vol. 15, iss. 1-2, pp. 381–386. URL: Link
Ziboreva O.Yu., Rasputina A.V. [Trends in the development of international audit activities in the era of economy globalization]. Izvestiya Baikal'skogo gosudarstvennogo universiteta = Bulletin of Baikal State University, 2018, no. 3, pp. 442–451. (In Russ.) URL: Link.442-451
Altukhova N.V. [Policies and procedures of the audit firm's system of quality control]. Auditorskie vedomosti = Audit Journal, 2017, no. 4, pp. 25–39. (In Russ.)
Itygilova E.Yu. [The grounds and types of professional responsibility of auditors]. Mezhdunarodnyi bukhgalterskii uchet = International Accounting, 2019, vol. 22, iss. 12, pp. 1364–1377. (In Russ.) URL: Link
Aguilera R.V., Desender K., López-Puertas Lamy M. Bridging Accounting and Corporate Governance: New Avenues of Research. International Journal of Accounting, 2021, vol. 56, no. 1, pp. 619–684. URL: Link
Bochkova E.V., Avdeeva E.A., Nazarenko V.A. [Analysis of corporate governance systems on the example of TNK of Russia and the UK]. Vestnik Akademii znanii = Bulletin of the Academy of Knowledge, 2018, no. 6, pp. 325–331. (In Russ.)
Kalenina M.Yu. [Audit as a factor of business efficiency]. Obrazovanie i nauka bez granits: sotsial'no-gumanitarnye nauki = Education and Science Without Borders: Sociological Science and Humanities, 2018, no. 10, pp. 84–88. (In Russ.)