The Government has launched a review which could lead to it ripping up transparency rules on what information some of the UK’s small companies must publish.
Ministers have also revealed the creation of a new authority which it promised would regulate auditors more closely.
They will review how micro-enterprises are defined, which the Government said is a “relic” of the EU.
By restoring confidence in audit and corporate reporting we will strengthen the foundations of UK plc
The definition “could be forcing too many of Britain’s smallest businesses to spend time and money preparing accounts to a level of detail only needed for larger companies,” it said.
Ministers hope that by reducing how transparent these companies must be they will be helped to grow “whilst bolstering investment, as we take advantage of Brexit freedoms to regulate in a more proportionate and agile way that works for British businesses”.
The current rules are “distracting them from focusing on growth and creating jobs,” the Government said.
It added: “Government will also consider the reporting requirements on smaller public interest entities to help attract high-growth firms, and review whether there are unnecessary restrictions on remunerating directors in shares.”
While rules for small businesses will be relaxed, larger firms will see their audit requirements balloon.
In recent years several businesses including Thomas Cook, BHS and Carillion have collapsed, leaving tens of thousands of people out of work.
Some of the companies’ problems have been linked to issues in their audit, so the Government has come under pressure to reform the sector.
“The reforms to improve the audit regime and corporate transparency will help prevent sudden large-scale collapses like Carillion and BHS, which hurt countless small businesses and led to job losses,” it said.
Ministers plan to replace the Financial Reporting Council with a new regulator, the Audit, Reporting and Governance Authority (ARGA).
It will also expand the number of businesses who come under the regulator, including for the first time unlisted companies with more than 750 employees and a greater than £750 million annual turnover.
To break up the dominance of the Big Four auditors – EY, KPMG, Deloitte and PwC – companies listed on the FTSE 100 and FTSE 250 will be forced to assign at least part of their audits to smaller firms.
Unlike its predecessor, ARGA will be able to investigate and fine directors of large companies if they breach their duties around corporate reporting and audit.
Minister for corporate responsibility Lord Callanan said: “Collapses like Carillion have made it clear that audit needs to improve, and these reforms will ensure the UK sets a global standard.
“By restoring confidence in audit and corporate reporting we will strengthen the foundations of UK plc, so it can drive growth and job creation across the country.”