The Financial Reporting Council (FRC)
today launched a public consultation on proposed updates to its
Audit Enforcement Procedure (AEP), as part of a comprehensive
end-to-end review of its enforcement processes. The consultation
runs until 9 January 2026 and seeks views from across its
stakeholder community on changes designed to provide more
targeted and timely regulatory
responses.
The proposals introduce three new
routes to resolution alongside existing options, expanding the
FRC's toolkit from two to five possible pathways when addressing
potential breaches of auditing and ethical standards. The new
routes include Published Constructive Engagement, an Accelerated
Procedure, and an Early Admissions Process, all designed to
deliver more proportionate outcomes while maintaining the
robustness of the current regime.
Under the current system, the FRC can
only choose between a private Constructive Engagement process
with audit firms or launching a full investigation. The proposed
changes aim to provide a more graduated approach that may better
reflect the FRC's response to the specific circumstances of
each case.
This consultation follows alongside
the FRC's formal engagement on its Future of Audit Supervision
Strategy (FASS), launched in August 2025, which aims to evolve
the FRC's supervisory model to continue to support a resilient
audit market for the future. Together, these key strategic
initiatives demonstrate the FRC's commitment to continuously
improve its regulatory approach and create a cohesive framework
that encourages firm accountability and drives system-wide
improvements across the
market.
Key proposals include making public
certain regulatory interventions through Published Constructive
Engagement, allowing others in the profession to learn from
issues identified. The proposed Accelerated Procedure would
enable faster resolution of cases where there is clear evidence
or admission of failings, while the Early Admissions Process
would allow firms to conduct their own reviews under FRC
oversight and admit identified breaches in certain
circumstances.
Richard Moriarty, CEO of the
FRC, said:
"The FRC's revision of its end to
end enforcement processes has been looked at our enforcement
procedures from end to end to make sure that they remain
efficient, effective and proportionate, but also that they
continue to maintain the trust and confidence as we serve the
public interest.
"We're proposing a graduated set
of interventions that would expand the range of tools we have to
take more proportionate and timely action while maintaining our
ability to conduct thorough investigations where
needed."
The FRC's enforcement activity plays a
crucial role in upholding the integrity, quality and independence
of statutory audits in the UK, protecting the public interest by
ensuring auditors comply with relevant laws, regulations and
professional standards. Financial sanctions deter misconduct and
uphold professional standards, while transparent publication of
outcomes informs the public of breaches and regulatory actions,
maintaining confidence in well-functioning UK capital
markets
The FRC will carefully consider all
submissions before finalising its policy approach and plans to
issue supporting documentation to aid implementation of the
revised proposals.
The final changes would then take
effect from 1 July 2026, subject to the outcome of the
consultation.
The consultation document and
supporting materials are
available on the FRC website, with responses requested by 23:59
on Friday 9 January 2026. The FRC is particularly keen to hear
from audit committees, investors, audit firms, professional
bodies and users of audited financial
statements.
Richard Moriarty, CEO, joined
Kate O'Neill, Director of Stakeholder Engagement and Corporate
Affairs to discuss the aims of the consultation for the latest
‘In Conversation' podcast episode. Listen to the podcast
episode.
Registrations are open
for the FRC's webinar on
Wednesday 8 October focusing on the consultation's proposals.
Attendees will hear from Kate O'Neill, Elizabeth Barrett,
Executive Director of Enforcement, and Anthony Barrett, Director
of Audit Quality Review.
