urgent

Corporate governance and auditing are argued to be joined at the hip. This is because the board of directors is responsible for preparing an entity's financial statements that are later audited by the external auditors. The board is also responsible for overseeing the work of external auditors, from auditor selection to conducting and completing the audit work. For a long time however, auditors have been the main target of criticism when accounting scandals and corporate failures occur. Yet, Section 4 of the UK corporate governance code (i.e. Audit, Risk and Internal Control) stipulates that the board bears overall responsibility for ensuring the effectiveness of internal and external audit functions, as well as in the integrity of financial and narrative statements. Thus, whether boards are oblivious, complacent, or even tacitly involved in the accounting scandals that have plagued many companies in the recent past, remains to be a matter of significant interest for regulators and policymakers, and scholars. Majority of previous reforms seeking to improve the quality of external audits in companies have also almost entirely been aimed at the auditors. It is not until now that serious and comprehensive reforms targeted at the root cause of problems bedevilling the UK's audit sector are being considered. The UK government hopes that the proposed reforms will help to "modernise the (current) audit and corporate governance regime" by introducing measures to not only break up the dominance of "Big Four" audit firms, but also make directors of the country's biggest companies more accountable. If the proposed reforms are passed successfully, boards will be sanctioned when poor quality audits are found. Similar to the Sarbanes-Oxley, boards will also be required to assess and report annually on the effectiveness of internal controls and procedures for financial reporting. This is intended to promote corporate transparency and prevent fraud and failure of firms. Negligent directors whose tenure is marked by significant accounting errors or irregularities may also face fines or suspensions. Directors would also be obligated to refund bonuses received up to two years after the pay award is made in the event of corporate collapse or other serious director failings. The Financial Reporting Council would also be replaced by a new audit regulator to be named the Audit Reporting and Governance Authority. The proposed reforms would be applicable to both publicly listed firms and other large privately held (including family-owned) companies, which are assumed to pose considerable risks to the UK economy in the event of their failure. These reforms are hoped to lead to improved quality of audits in UK companies by addressing both sides of the coin, that is, holding both auditors and boards accountable. This would also be a departure from the past where audit failings were mainly blamed on auditors. (Derived from GOV.UK, 2021; O'Dwyer, 2021) Requirement: As a partner of a small accounting firm, and drawing on the above commentary, you are required to write a memo including critical assessment of the proposed audit and corporate governance reforms. You should clearly discuss the likely impact of the proposed reforms in curtailing problems previously witnessed in the UK's audit sector. You answer should also explain the potential implications of the reforms on other capital market players including investors and regulators. Corporate governance and auditing are argued to be joined at the hip. This is because the board of directors is responsible for preparing an entity's financial statements that are later audited by the external auditors. The board is also responsible for overseeing the work of external auditors, from auditor selection to conducting and completing the audit work. For a long time however, auditors have been the main target of criticism when accounting scandals and corporate failures occur. Yet, Section 4 of the UK corporate governance code (i.e. Audit, Risk and Internal Control) stipulates that the board bears overall responsibility for ensuring the effectiveness of internal and external audit functions, as well as in the integrity of financial and narrative statements. Thus, whether boards are oblivious, complacent, or even tacitly involved in the accounting scandals that have plagued many companies in the recent past, remains to be a matter of significant interest for regulators and policymakers, and scholars. Majority of previous reforms seeking to improve the quality of external audits in companies have also almost entirely been aimed at the auditors. It is not until now that serious and comprehensive reforms targeted at the root cause of problems bedevilling the UK's audit sector are being considered. The UK government hopes that the proposed reforms will help to "modernise the (current) audit and corporate governance regime" by introducing measures to not only break up the dominance of "Big Four" audit firms, but also make directors of the country's biggest companies more accountable. If the proposed reforms are passed successfully, boards will be sanctioned when poor quality audits are found. Similar to the Sarbanes-Oxley, boards will also be required to assess and report annually on the effectiveness of internal controls and procedures for financial reporting. This is intended to promote corporate transparency and prevent fraud and failure of firms. Negligent directors whose tenure is marked by significant accounting errors or irregularities may also face fines or suspensions. Directors would also be obligated to refund bonuses received up to two years after the pay award is made in the event of corporate collapse or other serious director failings. The Financial Reporting Council would also be replaced by a new audit regulator to be named the Audit Reporting and Governance Authority. The proposed reforms would be applicable to both publicly listed firms and other large privately held (including family-owned) companies, which are assumed to pose considerable risks to the UK economy in the event of their failure. These reforms are hoped to lead to improved quality of audits in UK companies by addressing both sides of the coin, that is, holding both auditors and boards accountable. This would also be a departure from the past where audit failings were mainly blamed on auditors. (Derived from GOV.UK, 2021; O'Dwyer, 2021) Requirement: As a partner of a small accounting firm, and drawing on the above commentary, you are required to write a memo including critical assessment of the proposed audit and corporate governance reforms. You should clearly discuss the likely impact of the proposed reforms in curtailing problems previously witnessed in the UK's audit sector. You answer should also explain the potential implications of the reforms on other capital market players including investors and regulators