Governance shakeup lauded by UK internal auditors’ body

Proposed revisions of the UK’s Corporate Governance Code from the Financial Reporting Council’s (FRC) have been welcomed by the industry group representing internal auditors.

The new code is “shorter and sharper”, suggested Ian Peters, chief executive of the UK’s Chartered Institute of Internal Auditors (IIA).

Policing needs clarification, the IIA’s CEO warned, suggesting enforcement of “comply or explain” lacks detail.

The FRC is inviting feedback on its new version of the code, being updated to raise corporate governance standards amid a changing business environment.

“I am especially pleased to see the new version of the code is shorter and sharper and provides greater clarity for organisations on how they should promote good corporate governance,” said Peters.

“The Institute has long recognised the importance of the ‘tone at the top’, and the fact that internal auditors are critical to providing assurance about corporate culture, and so the inclusion of culture as a priority throughout the proposed code is also welcomed,” he said.

He cited “greater prominence throughout the document” for internal audit, as a sign of greater significance for the function.

“One area the Chartered IIA would like to see greater clarity on is the policing of the code, and what happens to companies when they fail to either ‘comply’ or ‘explain’,” Peters said.

“It is important that corporate governance does not become a “tick-box” exercise for boards, and that the proposed changes provide an opportunity for internal audit to showcase its skills,” he said.

“It is critical for the UK that we have a corporate governance framework in place that reflects the responsibilities of companies not only to their shareholders, but also to employees, customers and the wider community,” continued Peters.

“We look forward to continue working with the FRC on the stakeholder advisory panel,” he added.