FRC introduces evolved approach to audit supervision

News types: Policy Statements

Published: 25 March 2026

The Financial Reporting Council (FRC), following extensive engagement with stakeholders, is introducing a major evolution of its audit supervisory model, introducing a more proportionate, effective and integrated framework designed to enhance audit quality and reinforce resilience across the UK audit market.

Audits play a critical role in supporting trust and transparency in the UK economy. They underpin confidence in financial statements, enable the efficient flow of capital and contribute to the UK’s position as a global centre for investment.

Since 2018, the FRC has focused intensively on improving audit quality in collaboration with audit firms and Recognised Supervisory Bodies. Significant progress has been made and the FRC can now further adapt our supervisory approach to reflect the changing nature of the audit market and the wider ecosystem it serves.

The FRC’s revised approach announced today places more emphasis on firms’ Systems of Quality Management (SoQM), placing this at the heart of supervision activity. Built around a consistent, risk-based assessment, the new approach is supported by targeted follow-up work, thematic reviews and corroboratory inspections. This more integrated method is designed to strengthen audit quality, promote a more resilient audit system and ensure that the UK continues to offer an environment in which organisations can confidently grow and scale.

Implementation will begin in April 2026 for the largest firms, with further developments piloted during 2026/27. This work will complement our Building Capacity and Capability For Smaller Firms and SME market study initiatives in supporting a more coordinated supervisory framework across both Public Interest Entity (PIE) and non-PIE audits.

"The evolution of our approach to audit supervision reflects a wider programme in creating a regulatory environment that strengthens trust in UK markets while supporting business growth. Over the past decade, our supervisory approach has helped drive sustained improvements in audit quality, and today we have a stronger, more diverse audit market as a result. But we cannot stand still. This new approach represents the next evolution of our regulatory model — one that is more modern, proportionate and firmly grounded in risk.”

Richard Moriarty, FRC Chief Executive

“Our purpose has always been to serve the public interest, underpin investor confidence and support the UK’s economic success. Effective supervision is fundamental to sustaining a trusted and resilient audit market and profession as sustainable audit quality supports confidence in the UK’s capital markets.

"A system designed in a 2018 world is less relevant to a 2026 world. The revised approach is about ensuring the system works effectively as a whole. It will scale our supervisory attention to the level of risk involved, while preserving the high-quality information that investors rely on. This evolution strengthens our ability to hold firms to account while supporting them in enhancing their capabilities, ensuring that our supervision remains fair, proportionate, and effective across the whole audit market. Ultimately, we want to see sustained audit quality improvements across the market.”

Anthony Barrett, FRC Executive Director of Supervision
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