How UK Audit Committees Should Prepare for the CRA in 2026

The government scrapped its Audit Reform Bill in January 2026, but its replacement regulator will still gain new power to sanction directors.

For three years, boards and audit committees braced for the Audit, Reporting and Governance Authority (ARGA) — a stronger successor to the Financial Reporting Council (FRC) with sweeping powers over auditors and directors. That plan is now dead. In its place, a narrower, still-forming regime is taking shape, and it carries a provision most executives haven’t clocked: personal civil sanctions for directors, enforceable without a court hearing.

Audit and corporate governance reform has been on Whitehall’s agenda since 2018, when Sir John Kingman’s review of the FRC followed the collapses of Carillion, Thomas Cook and BHS. The Audit Reform and Corporate Governance Bill, announced in the July 2024 King’s Speech, was meant to be the answer: replacing the FRC with ARGA, extending Public Interest Entity (PIE) status to large private companies, and giving the regulator power to investigate and sanction directors for serious reporting failures.

In July 2025, the government confirmed the Bill would not get pre-legislative scrutiny that session, citing parliamentary capacity. Then, in January 2026, it went further: ministers confirmed they would not proceed with the wider reform package at all, and ARGA will not be created. According to law firm Slaughter and May’s 2026 governance analysis, the stated reason was growth — avoiding new costs and administrative burden on business. The FRC will still be given a statutory footing at some point, but there is no fixed timetable.

In its place, the Modernisation of Corporate Reporting (MCR) programme — first announced in October 2025 — will run a broad consultation, described by government as an “ambitious and holistic” review of financial and non-financial reporting. Slaughter and May’s analysis notes the government has signalled it intends to call the resulting regulator the Corporate Reporting Authority (CRA) rather than ARGA, reflecting its narrower, reporting-focused remit.

What Is the Corporate Reporting Authority, and Why Did the Government Scrap ARGA?

The CRA, as currently signalled, is not a resurrection of ARGA. It is a rebrand and rescope: a statutory FRC with a mandate centred on corporate reporting rather than full audit-market regulation. The government dropped more interventionist proposals — including managed shared audits and market share caps for the largest audit firms — after weighing the compliance cost against the benefit.

Executive Action:

• Assign the audit committee chair to track the MCR consultation once it launches in 2026.
• Brief the full board that ARGA is dead, but director accountability proposals are still live.
• Update the risk register to reflect the FRC’s continued role and its pending statutory footing.

What New Powers Will the CRA Have Over Company Directors?

The detail that should get audit committee attention is not what was dropped, but what survived. According to Slaughter and May’s analysis, the pending consultation will seek views on giving the new regulator authority to hold directors personally accountable for serious failures of existing corporate reporting duties — through a new regime of civil regulatory sanctions that can be enforced without court proceedings. That is a materially lower bar for enforcement than existing routes under the Companies Act 2006.

The consultation is also expected to revisit Public Interest Entity thresholds: extending status to unlisted businesses with more than 1,000 employees and turnover above £1 billion, a significant increase on the previously trailed 750-employee, £750 million threshold. According to the same analysis, firms sitting near that line should not assume the higher number keeps them out of scope indefinitely.

Executive Action:

• Ask general counsel to assess personal liability exposure under a civil sanctions regime enforceable without court proceedings.
• Map which group entities could fall within the expanded 1,000-employee, £1 billion turnover PIE threshold.
• Flag the audit-market oversight rollback to the committee ahead of the next auditor tender or rotation.

How Does This Intersect With Provision 29 and Existing Board Accountability?

Legislative uncertainty at Westminster does not pause code-level reform. Provision 29 of the UK Corporate Governance Code 2024 — which requires boards to move beyond narrative disclosure to a formal declaration on the effectiveness of material controls — proceeds on its own track. It applies to financial years beginning on or after 1 January 2026, meaning the first mandatory declarations will appear in annual reports for 2026 year-ends, published in 2027.

No declaration is due in 2026, but this is the preparation year: testing controls, closing evidence gaps, and rehearsing the declaration before it becomes mandatory. With CRA legislation still years from certainty, Provision 29 is the accountability mechanism that is actually live right now.

Executive Action:

• Commission a dry run of the Provision 29 board declaration during 2026, ahead of the 2027 deadline.
• Review committee terms of reference to reflect expanded internal control responsibilities.
• Identify evidence gaps in testing and validation needed to support the eventual declaration.

How Should Audit Committees Prepare Before the Consultation Lands?

Waiting for legislative clarity is the wrong posture. The government has been consistent on one point across three years of reversals: director accountability for reporting failures keeps surviving each redraft, even as everything else around it gets negotiated away. Audit committees that treat the CRA consultation as a distant policy exercise, rather than a near-certain expansion of personal liability, will be starting from behind when it lands.

INFORMD’s board checklist on director personal liability sets out the existing exposure landscape that any CRA sanctions regime would sit alongside — worth reading in parallel with this piece.

Executive Action:

• Add MCR consultation tracking to the audit committee’s 2026 work plan.
• Use INFORMD’s free assessment tools to benchmark current governance readiness.
• Review the technology strategy review template if AI or systems risk features in your reporting scope.

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