In the UK, Public Interest Entities (PIEs) are defined in accordance with the EU Audit Directive, which the UK originally adopted and has continued to apply following its exit from the European Union. The UK's definition and regulation of PIEs are geared towards ensuring the integrity and transparency of financial reporting by entities that have a significant public impact. This is critical for maintaining investor confidence and protecting the wider public interest.

### Definition of PIEs in the UK

In the UK, PIEs typically include the following types of entities:

1. **Listed Companies**: Entities with securities traded on a regulated market in the European Economic Area (EEA) or the UK.
2. **Credit Institutions**: Banks and building societies, among others, fall into this category.
3. **Insurance Companies**: This includes entities authorized under the UK Insurance Acts to carry on insurance business.
4. **Other entities designated as PIEs by domestic legislation**: This may include large private companies meeting certain criteria, public health service bodies, and other entities of significant public relevance as specified by UK regulations.

### Regulatory Framework

The regulation of PIEs in the UK involves several key aspects:

- **Audit Requirements**: PIEs are subject to stringent audit requirements to ensure the accuracy and reliability of their financial statements. This includes mandatory rotation of audit firms to foster independence and prevent conflicts of interest.
- **Corporate Governance**: Enhanced governance standards apply to PIEs, including requirements related to audit committees, their composition, and their responsibilities.
- **Transparency and Reporting**: PIEs are required to adhere to high standards of financial reporting and disclosure, including the reporting of non-financial information in some cases, to provide a comprehensive view of their performance and impact.
- **Oversight and Regulation**: The Financial Reporting Council (FRC) is a key regulatory body overseeing the audit and reporting standards of PIEs in the UK. The FRC's role includes setting audit standards, conducting inspections, and enforcing compliance.

### Post-Brexit Considerations

Following Brexit, the UK has the flexibility to adapt its regulatory framework for PIEs independent of the EU, though it has largely maintained continuity with the EU's Audit Directive to date. This includes retaining similar definitions of PIEs and comparable regulatory standards. However, there may be changes or adjustments in the future as the UK seeks to tailor its financial regulation to better suit its markets and public interest objectives.

The regulation of PIEs in the UK underscores the importance of transparency, accountability, and high standards of financial reporting and auditing for entities that play a significant role in the public sphere. This regulatory focus aims to protect investors, stakeholders, and the wider public by ensuring the reliability and integrity of financial information provided by these entities.

Yes, the Public Interest Entities (PIEs) in the UK have been significantly affected by the movement for audit system modernization, which gained momentum following the collapse of Carillion in January 2018. The Carillion case, involving the unexpected failure of one of the UK's largest construction and services companies, highlighted severe shortcomings in the audit and corporate governance practices, prompting calls for sweeping reforms in the auditing sector, especially for PIEs.

### Key Reforms and Impacts

#### Enhanced Regulatory Oversight

The aftermath of Carillion's collapse saw a push for stronger regulatory oversight over the audit practices of PIEs. The Financial Reporting Council (FRC), which oversees auditors, accountants, and actuaries in the UK, has been under scrutiny to enhance its regulatory framework. There has been a particular focus on improving the quality and reliability of audits for PIEs, leading to more stringent inspections and penalties for non-compliance.

#### Audit Market Competition

One of the significant concerns highlighted by the Carillion case was the dominance of the "Big Four" accounting firms in the audit market for PIEs. The subsequent debate has led to proposals aimed at increasing competition within the audit market, such as mandating joint audits (where a Big Four firm and a non-Big Four firm share the audit responsibility for a PIE) and operational separation of audit practices from consulting services within firms to ensure audit independence.

#### Audit and Assurance Policy

The government and regulatory bodies have been considering the introduction of an Audit and Assurance Policy, which would require PIEs to provide a clear explanation of their choice of auditor and the work done beyond statutory audit to assure the integrity of their financial statements. This policy aims to increase transparency and accountability in financial reporting.

#### Corporate Governance Reforms

There have also been calls for strengthening the corporate governance framework for PIEs, including enhancing the role and responsibilities of audit committees, improving the internal controls environment, and ensuring that directors are more accountable for the accuracy of their companies' financial reporting.

#### Future of Audit Framework

The UK government has expressed its intention to reform the audit sector comprehensively, including transforming the FRC into a new statutory regulator known as the Audit, Reporting and Governance Authority (ARGA). This new body is expected to have enhanced powers to regulate auditors, corporate reporting, and governance of PIEs more effectively.

### Conclusion

The movement towards audit system modernization in the UK, especially for PIEs, reflects a broader effort to rebuild trust in financial reporting and auditing in the aftermath of high-profile corporate failures like Carillion. While these reforms are still evolving, they underscore a clear direction towards increased transparency, accountability, and quality in the audit practices and corporate governance of Public Interest Entities.