FRC Proposes Expanded Enforcement Tools to Enhance Audit Oversight

The Financial Reporting Council (FRC) has launched a public consultation to update its Audit Enforcement Procedure (AEP), aiming to enhance the timeliness and proportionality of regulatory responses to breaches in audit standards. Open until January 9, 2026, the consultation invites feedback from audit committees, firms, investors, professional organizations, and users of audited financial statements. The proposed revisions introduce three new resolution methods, expanding the FRC's enforcement toolkit from two to five pathways. Currently, the FRC can either engage privately with audit firms or proceed with full investigations. The new graduated approach will allow tailored responses based on case specifics, promoting efficiency and effectiveness in enforcement actions. These changes align with the Future of Audit Supervision Strategy (FASS) launched in August 2025, reflecting ongoing efforts to refine audit oversight. Among the proposed mechanisms are Published Constructive Engagement, an Accelerated Procedure, and an Early Admissions Process, set to take effect from July 1, 2026. FRC CEO Richard Moriarty emphasized that these reforms aim to maintain public trust while enabling timely, proportionate interventions and maintaining rigorous investigative capabilities when necessary. Additionally, in September 2025, the FRC updated its UK International Standards on Auditing, including amendments to quality control processes for audit firms. These developments signal a shift towards more flexible regulatory practices in the UK audit market, potentially influencing compliance frameworks and risk management strategies across the insurance and financial services sectors.