Advocacy roundup: a strong start to the year for the Chartered IIA

The first few months of this year have begun with real momentum for our advocacy work at the Chartered Institute of Internal Auditors. Across Westminster, Whitehall, and boardrooms, we are seizing new opportunities to champion the profession and strengthen its voice. Our collective progress is helping to raise the profile of internal audit, demonstrate its vital role in good governance, and ensure that our members’ expertise continues to shape policy and practice where it matters most.

 

Leading the debate on audit reform and modern corporate governance

In January, the Government announced that it would not proceed with the Audit Reform and Corporate Governance Bill during this parliamentary session. On a more positive note, it confirmed that it remains committed to placing the Financial Reporting Council on a statutory footing with new legal powers “when parliamentary time allows”. It also intends to publish proposals “shortly” for a modernised corporate reporting framework.
In response, the Chartered IIA, along with many other stakeholders, expressed disappointment that the Bill will not be taken forward. We coordinated an open letter to Rt Hon Peter Kyle MP, Secretary of State for Business and Trade, signed by the Institute of Directors, NEDonBoard, ShareAction, UK Shareholders’ Association, the Better Business Act campaign, Audit Reform Lab, and others. The letter attracted strong media coverage, including in The Times.

 

Making a splash by advocating for stronger internal audit in the water industry

In February, we sent an open letter to Emma Hardy MP, Minister for Water and Flooding, to express our serious concerns that South East Water continues to operate without an internal audit function. This secured high-profile coverage, including in the Financial Times and Water Magazine, and gained significant traction on social media, including a post on X from water campaigner and former pop singer Fearghal Sharkey.

We first raised this issue with Ofwat and the Government more than two years ago. Since then, South East Water has experienced precisely the type of operational failures we warned about, including tens of thousands of customers across Kent and Sussex being left without clean water for weeks.

We have always been clear that internal audit is not a silver bullet and cannot prevent all operational failures. However, the absence of an internal audit function at South East Water may mean that senior management and the board are not receiving sufficient independent assurance over business critical risks, or over the effectiveness of the controls designed to manage and mitigate them. Had an appropriately positioned and resourced internal audit function been in place, it could have helped identify emerging issues earlier.

We have therefore urged the Government to support our call for internal audit to become a mandatory requirement for all water companies. This could be introduced by Ofwat as a new regulatory requirement or included by the Government within any forthcoming water reform legislation, which we expect in due course.

It is worth noting that internal audit is already mandatory for Scottish Water and Northern Ireland Water because they are publicly owned. Only the privatised water companies in England and Wales are not subject to this requirement. We believe this governance gap should now be addressed.

In March, we also issued a parliamentary briefing to MPs and Peers on the issue.

Strengthening governance for trust-based pension schemes

In March, we responded to the Department for Work and Pensions consultation on the governance of trust-based pension schemes. Our response highlighted an inconsistency in regulatory requirements. Financial services firms operating contract based pension schemes and FCA or PRA regulated master trusts must establish and maintain internal audit functions. By contrast, trust based occupational pension schemes and some master trusts regulated by The Pensions Regulator (TPR) are not subject to an equivalent requirement. This creates a risk of weaker internal audit and governance standards depending on regulatory oversight.

High profile corporate collapses illustrate the consequences of governance and control failures. At BHS, the absence of an internal audit function contributed to governance weaknesses and a pension deficit exceeding £570 million. Patisserie Valerie collapsed following major accounting fraud, placing both jobs and pensions at risk. In both cases, boards and audit committees may have lacked the independent assurance necessary to identify and address risks in a timely way.

We therefore recommended that internal audit should be a regulatory expectation for large trust based pension schemes and master trusts. Secondary legislation could amend the Pensions Act 2004 to introduce a proportionate internal audit requirement, alongside stronger internal audit expectations within TPR’s Code of Practice. We will continue to engage Government officials and TPR on this issue.

 

Other advocacy highlights

  • In January, we coordinated a virtual roundtable with Chief Audit Executives from publicly listed companies on the use of AI in corporate reporting. This was organised for the Financial Reporting Council and Lancaster University to support their ongoing research project.
  • In February, we provided comprehensive feedback on the updated ICAEW guide for directors, What audit committees want directors to understand. We are pleased that the guide now includes several references to our Internal Audit Code of Practice and the International Professional Practices Framework.
  • In February, we issued our parliamentary briefing, Risk in Focus: The Top Business Risks in 2026, which provides key insights from our flagship research project.
  • In March, we supported a NEDonBoard virtual roundtable on how non-executive directors, including audit committee members, can use internal audit as a strategic tool for oversight and assurance. Speakers included Chartered IIA President Arleen McGichen and Sally Clark, a non-executive director and chair of the independent committee that developed the latest version of our Internal Audit Code of Practice.
  • In March, we responded to Audit Scotland’s consultation on its new Code of Audit Practice. We recommended several enhancements to strengthen the wording on internal audit and highlighted that the Global Internal Audit Standards and the UK Public Sector Application Note have now replaced the Public Sector Internal Audit Standards.

 

Highlights of recent press coverage

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