Tougher director accountability on the way, UK watchdog tells companies

By Huw Jones

LONDON (Reuters) – Britain’s accounting and company governance watchdog said on Thursday it will introduce its own version of a U.S. rule to make directors accept more “overt” responsibility for internal controls.

Britain’s industry ministry said last month it would not put in law a version of the mandatory U.S. Sarbanes-Oxley rule, which forces U.S. company directors to personally attest to the adequacy of internal controls and face prison for breaches.

Companies in Britain had pushed back against such a move aimed at ensuring accuracy of information published in financial reports.

The ministry wants to reform auditing and corporate governance after collapses at builder Carillion, retailer BHS and elsewhere, though some changes require legislation.

Jan du Plessis, chair of the Financial Reporting Council, said the watchdog would set out shortly how some of the planned reforms could be implemented without legislation.

The omission of a “UK-lite” version of Sarbanes-Oxley was a missed opportunity given there is a need to look at companies and not just auditors when it comes to improving financial reporting, du Plessis told a City & Financial event in his first speech as FRC chair.

“Just to put all the onus on the audit profession and to hold the audit companies accountable for when things go wrong really misses the point,” du Plessis said.

“With the government’s support, we will be consulting towards the end of this year and the early part of next year about the merit of using the corporate governance code and the audit reforms we are working on to put more pressure on directors to take responsibility for their own internal controls,” du Plessis said.

“It won’t be Sarbanes-Oxley but it is the same idea.”

Under the governance companies must say if they comply with its provisions or explain why they are not.

(Reporting by Huw Jones; editing by David Evans)