FRC updates audit enforcement rules for faster outcomes

The Financial Reporting Council (FRC) has published reforms to its audit enforcement procedure today (17 June), in a bid to modernise its regulatory toolkit.

It comes as the regulator is moving to an integrated approach to align supervisory, investigatory and enforcement activity. The FRC is looking to identify risks earlier, act quicker and support continuous market improvements. 

Under the new principle that enforcement serves the public interest, the framework introduces a graduated range of responses beyond standard investigations or private constructive engagement. It is understood that cases will be handled based on their impact, while retaining the capacity to pursue full investigations for significant failures.

The framework includes three new routes to resolution: published constructive engagement, which combines remediation with public transparency; an accelerated procedure for faster resolution when evidence is available; and an early admissions process to encourage firms to cooperate earlier.

Richard Moriarty, chief executive of the FRC, said: “Good regulation supports well-functioning markets by giving confidence that high standards are upheld and action is taken when they are not met. The FRC’s toolkit retains the use of investigations to maintain accountability and public trust where serious or significant failures have occurred. 

“This revised framework now provides us with additional options which are more proportionate, timely and targeted, which will support us to resolve issues more quickly and support system-wide learning.”

Penrose Foss, executive director of investigations and enforcement at the FRC, said: “The revised Audit Enforcement Procedure introduces a broader and more flexible range of routes to resolution. The updated framework enables proportionately focused enforcement activity to achieve swifter accountability. 

“Robust enforcement is fundamental to confidence in audit, corporate reporting and UK markets more broadly. These reforms are about ensuring the FRC continues to operate as a modern, effective regulator, using the right tools at the right time to serve the public interest.”

Anthony Barrett, executive director of supervision at the FRC, added: “The FRC’s new supervisory, investigatory and enforcement approaches represent an integrated, modernised approach to regulation. 

“Earlier engagement and identification of issues through our supervision work, combined with the timelier flow of lessons learned through these reforms, support continuous improvement by audit firms in addition to ensuring there is accountability where failures occur.”