UPDATE 2-UK company directors face personal liability for financial statements - sources

* UK expected to announce audit reforms on Tuesday

* 4-month consultation expected for 200-page paper

* Could lead to individuals holding fewer directorships
(Adds more detail, reaction)

By Huw Jones

LONDON, Feb 5 (Reuters) - Company directors would become
personally liable for the accuracy of their financial statements
under landmark proposals from Britain's finance ministry next
week to improve corporate behaviour, sources familiar with the
plans said on Friday.

Directors would have to vouch for the accuracy of financial
statements in a version of the Sarbanes-Oxley regime introduced
in the United States to crack down on accounting fraud after
energy company Enron collapsed, the sources said.

"We think this is a good thing and I would expect it to have
teeth, but I don't expect it to be a wholesale transplant from
the U.S.," said Michael Izza, chief executive of ICAEW, an
accounting body.

Currently, liability for the accuracy of corporate financial
statements rests with the company.

Britain's business ministry is expected to publish on
Tuesday long-awaited reforms to raise quality and competition in
company audits after a string of collapses and accounting
scandals at companies such as retailer BHS, builder Carillion
and cafe chain Patisserie Valerie.

Three government-backed reviews of the audit market set out
150 recommendations to boost competition in audit and strengthen
supervision of accountants to improve standards by setting up a
more powerful regulator, the Audit, Reporting and Governance
Authority or ARGA.

Legislation is needed to implement some of the key
recommendations, but parliamentary time has been clogged by
Brexit and COVID-19 for the past two years or more.

"The government has accepted the findings of three
independent reviews into audit and corporate reporting, and is
committed to acting on their recommendations," the business
ministry said on Friday, adding that comprehensive proposals
would be published shortly.

A 200-page paper will be put out to a four-month public
consultation, the sources said.

It is expected to ask whether all directors of a company
should be made equally responsible - currently the focus is on
the chief executive and chief financial officers - raising risks
for directors.

"I think people holding very many company directorships will
be a thing of the past," Izza said.

The consultation is expected to propose "managed shared
audits" or a smaller auditor like BDO, Mazars or Grant Thornton
auditing some operations of a blue-chip company to get more
experience.

It could also toughen up rules on "capital maintenance",
such as by ensuring that companies have enough cash to pay any
dividends, after Carillion went bust just months after
announcing payouts.

So-called operational separation of audit and advisory work
underway on a voluntary basis at the "Big Four" accounting firms
- Deloitte, EY, KPMG and PwC - could be extended to the next
tier down of auditors, the sources said.
(Reporting by Huw Jones. Editing by Jason Neely and Mark
Potter)

Carillion Plc