The Financial Reporting Council announces today details of the implementation phase of its Choice in the UK Audit Market project following publication of the final report of its Market Participants Group. Details are included in the FRC Update for the audit choice project published today.

Background

The Market Participants Group (MPG) was established in October 2006 to provide advice to the Financial Reporting Council on market-led actions to mitigate the risk that could arise in the event of one of more of the Big Four audit firms leaving the market. The Group’s final report, containing 15 recommendations to enhance the efficiency of the UK audit market, is also published today.

Implementation arrangements

The FRC Update summarises how the MPG’s 15 recommendations will be implemented. The recommendations are ultimately targeted to audit firms, companies and investors, although in some cases enabling actions by professional bodies, regulators or legislators may first be needed and these are shown in the tables.

Some of the steps planned for the implementation phase include:

• Preparation of guidance to audit firms on reporting their capabilities, governance arrangements and profitability.
• Preparation of guidance to companies on providing shareholders with information on their auditor selection policy and on the use of audit firms from more than one network.
• Further consideration of changes to audit firm ownership rules.

Any material changes to regulatory arrangements will be assessed for proportionality and effectiveness, with stakeholders being consulted before decisions are taken.

The FRC will make a public report every six months on progress in implementing the recommendations.

International

The Update also summarises international developments relating to audit market concentration.

FRC Chief Executive Paul Boyle said:

“The responses to the MPG’s Interim Report have demonstrated broad support for its recommendations. The FRC will support their implementation in a timely fashion and will report regularly on progress.”

1. The Financial Reporting Council (FRC) is the UK's independent regulator responsible for promoting confidence in corporate reporting and governance.
2. The FRC's functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy & Actuarial Discipline Board) and by the Council. The Committee on Corporate Governance, whose members are drawn from the Council, assists it in its work on corporate governance.
3. All media enquiries should be addressed to Ian Rodger, Head of Communications, +44 (0)20 7492 2395 or email at i.rodger@frc.org.uk