The Financial Reporting Council has unveiled a plan to improve company auditing in the UK, to remove risks and improve transparency for investors and employees alike.
In the 50-page document, Developments in Audit 2018, the FRC sets out its plans for a strategic programme of work to ensure audit better serves the public interest.
According to the FRC, this programme encompasses work on auditor independence, audit quality, the future needs of investors and corporate viability.
The document said this was important to give investors in UK companies the confidence and information they needed to make better investment decisions, through improved auditing standards.
It said: "Audit is a public good – it gives stakeholders confidence in the integrity of financial information in the capital markets which forms the basis for investment decisions."
It also alluded to the ongoing pensions problems caused by company failures, such as the British Home Stores and Carillion collapse, which revealed significant problems with pension scheme funding.
According to the FRC document: "Audit also provides valuable assurance to company boards about the integrity of the entity.
"A well run, transparent and accountable business not only generates a return on capital to fund more investment, but also gives employees confidence that their jobs and pensions are secure, and suppliers confidence they will be paid."
The FRC said over 2018 it has concluded several "significant cases" because of investment to expand its enforcement team.
It claimed: "We have completed our work on a timelier basis and levied over £23m of financial penalties."
But the FRC said the task of ensuring accurate reporting was not over. The document stated: "We are also currently undertaking a thematic review looking at the work that auditors do when reviewing the front half of the annual report to ensure that the auditor has obtained evidence to allow them to report by exception that information is not materially misstated.
"We have now launched a project to determine whether, in the absence of plans at the international level, we can take actions in the UK to strengthen the framework of requirements auditors are subject to in this respect."
This project focused on the auditor’s work effort when undertaking an assessment of going concern, to determine whether the current auditing requirements are sufficient, and whether auditors need more detailed guidance to ensure that they meet the expectations of users of financial statements.
According to the FRC, it aims to complete this work to support a public consultation on any revisions to the existing standard and associated guidance material at the start of 2019.
Nicholas Hyett, equity analyst for Hargreaves Lansdown, said: "It’s difficult to exaggerate the importance of high quality financial reporting, when confidence is so key, not just to investors but to the entire economic system.
"Those who lost out from the collapse of Carillion included not just investors but employees, pensioners, suppliers, and the government. All fell afoul of overly aggressive financial reporting, in a business which was complex and difficult to understand.