FRC expands corporate sandbox innovation programmes

The Financial Reporting Council has expanded its corporate innovation programme, inviting audit firms and companies to participate in three new regulatory sandbox initiatives.

The programmes include an audit technology and artificial intelligence sandbox alongside a research project designed to identify barriers to digital adoption among smaller accounting firms. The regulator has also launched a second phase of its initiative focused on simplifying corporate annual reporting.

The projects, managed by the innovation and improvement hub of the regulator, aim to help businesses test generative software while maintaining market compliance. The reporting sandbox will specifically target smaller listed companies to streamline financial disclosures and reduce administrative complexity for investors.

Separately, the regulator published a paper exploring data materiality for small and medium-sized enterprises to address industry concerns regarding the scalability of auditing standards.

Chief executive of the Financial Reporting Council, Richard Moriarty, said: “Technology, including artificial intelligence, could have a profound effect on the future shape of audit markets around the world. I’m keen for the UK to be at the leading edge of this, supported by a regulatory environment that has a competitive advantage in enabling innovation whilst maintaining high standards and quality that command public confidence.

“This sandbox reflects our commitment to supporting firms to test and evolve their use of emerging technologies at an early stage to foster mutual learning and ultimately help to put the UK on the front foot in realising benefits for customers and users of audit.”

He added: “Good regulation should create the conditions for innovation, not hold it back. Through our sandboxes, we are giving firms and companies the confidence to test new approaches while maintaining the high standards that underpin trust in UK markets.”

Chief executive of Built Cybernetics, Nick Clark, said: “We were really impressed at the FRC’s approach and their support for us as a small issuer grappling with the challenge of an overly long annual report. Having open discussions was a helpful way to change our approach and start to streamline our disclosures. We were able to identify some near-term changes and further improvements for our annual report in future.”

Chief financial officer at Digitalbox, Richard Spilsbury, concluded: “I really appreciated being able to talk to technical experts with a common interest in making annual reports more comprehensible. Joining the sandbox has given us greater confidence that we can make our annual report clearer and more effective for its users in future.”