As we transform towards the Audit, Reporting and Governance Authority (ARGA), the FRC has revamped the way we supervise audit firms.
Above all else, our priority is to ensure that audit firms are being run in a manner that enhances audit quality and supports the resilience of individual firms and the wider audit market. To do this, we have adopted a forward-looking supervisory approach to hold the audit firms to account for making the changes needed to safeguard and improve audit quality.
We have identified three complementary activities within the Supervision division and provided dedicated senior resources to oversee this approach. These are: Audit Firm Supervision, Audit Market Supervision and Audit Quality Review.
Read further information on Our Approach to Supervision.
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As the Competent Authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality. One of the key strategic objectives of the Supervision Division for the 2020/21 financial year is to build and deepen our supervision of the major audit firms, including governance, structure, audit quality management, culture and resilience and report views on each firm accordingly. In carrying out this objective, we aim to effectively manage the risk that the audit market is severely disrupted by the failure of a significant audit firm of their withdrawal from all or part of the market. Preserving the resilience of the UK audit market is an objective of both the Audit Firm Governance Code (2016) and the Operational Separation Principles (2020), and complements the key objective of promoting and improving audit quality over time. We have now set up a page dedicated to Audit Market Resilience.
We have set out some minimum standards guidance for the Big Four audit firms in relation to the recovery planning process. Read the Minimum Standards Guidance (PDF).
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