Directors will be held personally responsible for the accuracy of their company’s financial statements — with fines and bans for major failures — as part of far-reaching proposals to overhaul UK corporate governance and audit oversight.

Kwasi Kwarteng, the new business secretary, will publish long-delayed reforms in a white paper as early as next week. They will include significant changes to the audit industry in the wake of accounting scandals at companies such as Carillion and Patisserie Valerie.

The 200-plus pages of recommendations set to be issued by Beis, the UK business department, will include the introduction of rules similar to the US Sarbanes-Oxley regulations introduced in response to the fall of Enron, according to officials and industry executives.

The changes will make directors — rather than boards — personally responsible for the accuracy of company financial statements through the sign-off of internal controls and risk management. Directors will face fines or temporary bans if they are found to have breached their duties to uphold corporate reporting and audit standards.

There will also be new powers for the regulator to set and enforce standards for FTSE 350 companies’ audit committees.

New rules to report environmental and social obligations — such as climate risk — are expected to be introduced via legislation, according to multiple industry executives.

Ministers will also consult on whether to extend the definition of a “public interest entity” — currently mostly limited to listed companies — to include large private groups, charities and universities. This could extend the remit of the audit regulator to cover thousands of additional companies.

The proposed rules might mean a higher cost of compliance, however, and will raise questions about the extra burden on British companies as they emerge from the pandemic.

“These are big costs for British businesses,” said one UK-based audit chief. “The government needs to make sure that there are not so many constraints that it will be too expensive to do business here.”

Ministers are also searching for ways to cut red tape, and attract fast-growth tech-based companies to London through a separate review of the UK listings regime, which could clash with the push for more stringent and costly corporate governance.

Next week’s white paper policy document will accept most of the main recommendations of the three independent reviews that have been carried out over the past four years into the sector.

These raised concerns about the quality and effectiveness of audits, and recommended a series of radical reforms of the profession, which is dominated by the “Big Four” firms EY, KPMG, Deloitte and PwC.

The government has backed the operational separation of the audit and advisory work of the Big Four, overseen by a stronger independent regulator, to end accusations of conflicts of interest.

However, a proposal by the Competition and Markets Authority in its 2019 report that UK-listed companies should be required to use two firms to do a “joint audit” of accounts — including one from outside the Big Four — is likely to be dropped, according to people familiar with the situation.

Instead Beis is expected to push for a more limited plan for a “managed shared audit” for all FTSE 350 companies. That will allow smaller “challenger” firms to audit a “meaningful proportion” of a company’s business — such as its subsidiaries.

A key recommendation from the 2018 report into audit regulation by John Kingman — for a new regulator called the Audit, Reporting and Governance Authority to oversee the industry — is already being worked on. This will have greater powers to investigate and sanction auditors, but will also now have scope to pursue company directors.

The white paper is expected to have a 16-week consultation period — much longer than normal — given the extent of the reforms, with more than 100 recommendations, according to people familiar with the situation.

“It’s an enormous document and probably one of the most robust I’ve ever read,” said one Whitehall figure.

A government spokesperson said: “Strengthening our corporate governance and audit regime will help to ensure that the UK remains a world leader in corporate transparency and advance its status as a place of the highest standards in audit.”

There is also set to be a requirement for audit firms to look for fraud and abuse, an issue after the scandals at companies such as Patisserie Valerie.

Michael Izza, chief executive of accountants’ body ICAEW, said: “This will be as much a corporate governance reform as it is of the audit profession. We have been waiting a long time for this consultation and will be glad to move forward.”