New Business Secretary Alok Sharma has been urged by City grandee Sir Donald Brydon to set up a new, more powerful audit watchdog as soon as possible following a string of scandals. Mr Sharma must take rapid action to restore confidence in the industry by forging ahead with a new regulator, Sir Donald said, following on from a major report he wrote last year on how to boost accounting quality. The Government supports a recommendation to create the Audit, Reporting and Governance Authority (Arga) – a rebranded accounting regulator with a wider remit to uphold audit standards and the power to impose severe penalties for wrongdoing. However, there is no timescale for when the organisation will be launched and reform campaigners fear it could slip down the agenda. Speaking at a gathering of senior auditors and accounting regulators, former London Stock Exchange chairman Sir Donald said: “The first thing I would do if I was him would be to establish Arga. I don’t know how strong his priority is going to be.” The Brydon review, published in December, was the last of three inquiries into the audit industry last year. It followed widespread claims that auditors failed to spot serious problems when checking the books at firms such as BHS, Carillion and Patisserie Valerie. Accountants have been repeatedly accused of failing to stand up to senior management at the companies they oversee, and exposing shareholders to huge losses. Sir Donald said: “Audit has adopted an increasingly liability-averse, compliance-driven mindset that has not served adequately the user and the wider public interest.” The previous government committed to forming Arga as a new, beefed-up audit watchdog to replace the Financial Reporting Council, which had been widely criticised as toothless and stuffed with former executives from the industry. This process will require new laws, but the Queen’s Speech in December did not include any plans for legislation on audit reform. Sir Donald, who is now chairman of software company Sage, said he hoped parliamentary time could be found to complete reforms as soon as possible. The accounting industry must push ahead with introducing recommendations from the three reports that do not need legal changes rather than waiting for the Government, Sir Donald said. He said: “The time for audit reviews is now over. “[The people in] this room can do 70pc to 80pc of what is necessary [without waiting for legislation]." Others including City investors also have a role to play, he added. Failure by shareholders to push for companies to change their approach to auditing their accounts would demonstrate that “for all their fine sentiments, they don’t really care”, he said.