Conduct Committee

The Conduct Committee is responsible for overseeing the FRC’s work in promoting high quality corporate reporting. Its responsibilities include overseeing:

Monitoring of Recognised Supervisory and Recognised Qualifying Bodies
Audit Quality Reviews
Corporate reporting reviews
Professional discipline
Oversight of the regulation of accountants and actuaries

It also has statutory functions which are delegated by the Secretary of State under section 457 of the Companies Act 2006 and section 14(2) of the Companies (Audit, Investigations and Community Enterprise) Act 2004. The Conduct Committee exercises these functions in accordance with its Operating Procedures (PDF).

The Conduct Committee, which meets monthly, comprises FRC Board members and others with a range of skills, experience and relevant technical expertise. It has a lay majority of lay members and excludes current practising auditors as well as officers of the professional bodies it regulates.

The Conduct Committee is supported by three further Committees: the Case Management Committee whose functions include monitoring and providing oversight in respect of enforcement investigations and tribunal proceedings, the Audit Quality Review Committee and the Corporate Reporting Review Committee which ensure the consistency and quality of the FRC's monitoring work. Members of these Committees, including the Chairs, sit on the Conduct Committee.

Conduct Committee Terms of Reference

1. Membership

The Conduct Committee is a Committee of and shall be appointed by the FRC Board of Directors. Membership of the Committee shall comprise:

Chair of the Conduct Committee
Executive Director of Conduct
Other non-executive Directors of the FRC
Chair of the Corporate Reporting Review Committee
Chair of the Audit Quality Review Committee
Chair of the Case Management Committee
Other Committee members.

The Committee shall have a majority of members who are not practising accountants and/or actuaries and no member shall be:

a member of the Codes & Standards Committee;
a practising auditor or an individual who has during the previous 3 years
- carried out statutory audits;
- held voting rights in an auditing firm;
- been a member of an administrative management or supervisory body of an audit firm; or
- been a partner, employee or otherwise contracted by an audit firm; or
an officer of any of the accountancy or actuarial professional bodies.

2. Quorum

The quorum for Committee meetings shall be 5.

3. Secretary

The Company Secretary or his/her nominee shall act as Secretary of the Committee (the Secretary).

4. Frequency of Meetings

The Committee shall meet not less than 8 times a year or as required at the call of the Chair.

5. Attendance at Meetings

Only members of the Committee shall have the right to attend Committee meetings. However other individuals may be invited to attend all or part of any meeting as and when appropriate.

6. Notice of Meetings

Unless otherwise agreed, notice of each meeting confirming the venue, time and date, together with an agenda of items to be discussed and supporting papers, shall be forwarded to each member of the Committee and any other person required to attend, no later than 5 working days before the date of the meeting.

7. Minutes of Meetings

The Secretary shall minute the proceedings and resolutions of all meetings of the Committee, including recording the names of those present and in attendance. Minutes of Committee meetings shall be circulated to all members of the Committee.

8. Responsibilities

Matters reserved to the Committee

The Committee shall:

Exercise the delegated functions of the Secretary of State under section 457 Companies Act 2006 and section 14(2) of the Companies (Audit, Investigations and Community Enterprise) Act 2004;
Maintain the Conduct Committee Operating Procedures;
Appoint members of the Financial Reporting Review Panel

Matters delegated to the Committee by the FRC Board

The Committee shall:

Oversee the FRC’s supervisory, monitoring and enforcement work with the objective of promoting high quality corporate governance and reporting
Oversee the executive’s monitoring of compliance with the conditions of the delegation arrangements with each recognised supervisory body (RSB) under SATCAR16;
Oversee the executive’s monitoring of compliance with the requirements of the Companies Act 2006 by each RSB and recognised qualifying body (RQB);
Advise the FRC Board on its exercise of the functions of the competent authority under SATCAR16 including on the delegation of tasks to the RSBs or their removal or retention;
Advise the FRC Board on its exercise of the delegated functions of the Secretary of State under Part 42 of the Companies Act 2006 and its exercise of the functions of the Independent Supervisor appointed under Chapter 3 of Part 42 of the Companies Act 2006 including on
- the continued recognition of bodies to offer a recognised audit qualification and/or to supervise auditors
- the need to impose a direction or penalty on an RSB or RQB
- the need to apply to the court for an Order to require a RSB or RQB to meet its statutory obligations
- the recognition of an Overseas audit qualification
- the maintenance and exercise of the arrangements necessary to supervise the Auditors General;
Advise the FRC Board on the approach to be taken to non-statutory oversight of the actuarial and accountancy professions;
Advise the FRC Board on the maintenance and exercise of the arrangements for the monitoring of the performance of statutory audit functions by means of inspections and for investigation and discipline of public interest cases and audit enforcement;
Exercise those functions delegated to the Conduct Committee in accordance with the Accountancy and Actuarial Schemes, the Auditor Regulatory Sanctions Procedure, Crown Dependency Auditor Regulatory Sanctions Procedure and the Audit Enforcement Procedure;
Exercise those functions delegated to the Conduct Committee in accordance with the FRC's processes pursuant to Articles 4(2), 17(6) and 17(8) EU Audit Regulation and section 115A Companies Act 2006;
Decide whether to commence a Case Enquiry, determine the scope of any such enquiry and what, if any, action to be taken on its conclusion;
Advise the FRC Board on the publication of annual public reports of the FRC’s conduct activities;
Consider and respond to requests for advice from the Codes & Standards Committee, having taken the advice of one or more of the Audit Quality Review, Corporate Reporting Review or Case Management Committees if appropriate;
Appoint members of the Audit Quality Review Committee, Corporate Reporting Review Committee, Case Management Committee and Enforcement Committee;
Approve operating plans governing the FRC’s supervisory, monitoring and enforcement activities and oversee the quality of work and delivery of the plan;
Set strategic goals for the FRC’s supervisory, monitoring and enforcement work, including by identifying the main areas of risk that need to be addressed;
Set standards for the quality of supervisory, monitoring and disciplinary work and the criteria to be applied in regulatory decisions;
Identify the current, emerging and potential risks to the quality of corporate governance and reporting in the UK;
Assess the risks to the quality of corporate governance and reporting in the UK and approve the adequacy of actions to mitigate those risks;
Approve any plans for thematic studies and the publication of any findings from such work;
Perform such other functions as shall be determined by the Board from time to time.

9. Reporting Responsibilities

The Committee shall report to the Secretary of State on the exercise of the delegated functions of the Secretary of State under section 457 Companies Act 2006 and section 14(2) of the Companies (Audit, Investigations and Community Enterprise) Act 2004.

The Committee Chair shall report to the Board on the Committee’s proceedings and the activities and proceedings of the Case Management Committee and Monitoring Committee at each Board meeting. The Committee shall make whatever recommendations to the Board it deems appropriate on any area within its remit.

The Committee Chair shall make a statement in the FRC Annual Report about its activities including the frequency of, and attendance by members at, Committee meetings.

10. Other

The Committee shall review its own performance and terms of reference and the performance and terms of reference of the Monitoring Committee and the Case Management Committee from time to time and report to the Board and implement and/or recommend any necessary changes.

Approved by the FRC Board with effect from 17 June 2016

Conduct Committee Policies and Procedures

The Conduct Committees Policy and Procedures include information on our:

Terms of Reference;
Scope of Independent Inspections;
Operating Procedures for reviewing corporate reporting
Regulatory Structure Document (PDF).