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FRC Annual Report and Accounts 2023/24

Presented to Parliament by the Secretary of State for Business and Trade by Command of His Majesty

Ordered by the House of Commons to be printed on 23 July 2024 Company number 02486368

OGL

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ISBN 978-1-5286-4784-7

E03101507 07/23

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Printed in the UK by HH Associates Ltd. on behalf of the Controller of His Majesty's Stationery Office

1. 2023/24 Highlights

April

FRC launches Technology and Digital Hub.

May

FRC launches Scalebox initiative to promote competition and quality for smaller audit firms.
FRC launches UK Corporate Governance Code consultation.
FRC publishes minimum standard for audit committees.

June

FRC publishes Audit Enforcement Procedure consultation response.
FRC publishes research on impact of proxy advisers and Environmental Social and Governance (ESG) ratings agencies on companies and Investors.

July

FRC publishes Annual Enforcement Review reporting resolution of record number of enforcement cases in 2022/2023.
FRC Lab publishes report on ESG data use and distribution.
FRC publishes overview and results of audit quality at the Tier 1 firms.

August

FRC welcomes record number of UK Stewardship Code Signatories.

September

UK and New Zealand audit authorities agree mutual recognition of audit qualifications.

October

Richard Moriarty appointed CEO of Financial Reporting Council.
FRC publishes report on how companies can improve their corporate reporting by taking a more focused, strategic approach to assessing materiality.
FRC sets out reporting expectations amidst a period of high interest rates, persistent inflation and ongoing economic uncertainty.
FRC announces outcomes and summary detailed findings of investigations into the audits of Carillion plc.

November

FRC publishes policy update to modernise the regulation of audit, corporate reporting and governance.
FRC welcomes new remit letter from the Secretary of State for Business and Trade.

December

FRC publishes annual review of competition in the audit market.
FRC publishes inspection findings for the Tier 2 and Tier 3 audit firms.
UK and Switzerland authorities jointly approve mutual recognition of audit qualifications.
FRC publishes report on the quality of major local audits.
FRC Lab publishes insight report on Structured Digital Reporting.

January

FRC publishes revised UK Corporate Governance Code 2024 and guidance.
FRC updates Ethical Standard for Auditors.

February

FRC supports consultation of proposals to tackle the Local Audit backlog.
FRC publishes systemic overview of barriers to competition in the UK audit market.
FRC publishes revised version of Actuarial Standard Technical Memorandum 1.

March

Launch of the UK Stewardship Code 2020 review.
FRC announces successful signatories of the UK Stewardship Code.
FRC launches Final FRS 102 Periodic Review Amendments.

2. Statement by the Chair

I am pleased to present the Financial Reporting Council's 2023/24 Annual Report and Accounts. Over the past year, the FRC has continued to demonstrate its forward-looking approach as a regulator

focused on fair and proportionate regulation, acting in an assertive but balanced manner, serving the public interest in improving reporting, audit quality and governance, and enhancing trust in corporate Britain. This year saw Richard Moriarty join as CEO in October and we have been working closely together since his arrival to define the organisation's priorities, which we published in the Plan and Budget on 25 March

The Board and I were delighted to attract such a high-calibre candidate as Richard to lead the FRC into this stage of its journey. I would like to thank Sir Jon Thompson for his work until his departure in July 2023 and to Sarah Rapson for her leadership prior to Richard's arrival. The UK continues to be much respected around the world for its high standard of financial reporting, audit quality, and corporate governance; and we have further built upon that well-deserved reputation through our work publishing the revised UK Corporate Governance Code
High-quality financial reporting, robust audit, and good corporate governance and stewardship helps to protect investors and all other stakeholders, such as pensioners, taxpayers, suppliers, and society at large. We are continuing our process of ongoing improvement, a recent example being the assessment and review of the Stewardship Code, which will conclude next year.

Since our last Annual Report and Accounts, we have put in place the majority of the recommendations for improvement that were in our control and which did not require legislative support. Work continues on the final few. This has been made possible by building on the success of the transformation programme that was undertaken to ensure the FRC is an effective regulator respected by stakeholders.

Completion of the FRC's modernisation journey still requires the passing of legislation, and while we continue to make strong progress on multiple fronts we remain resolutely focused on ensuring that our regulatory toolkit is used to best effect.

Our remit is underpinned by the four faces of our regulatory model. As a system partner, we focus on educating, collaborating, and supporting continuous improvement across the system. We facilitate and encourage good practice and behaviours from our stakeholder community, and we supervise the resultant performance, culture and behaviours. Finally, we have an important enforcement role where we investigate conduct and apply proportionate financial and non-financial sanctions.

It is right that the FRC considers its impact on the UK's economic growth and competitiveness, and we welcomed the inclusion of this

Headshot of an older man with glasses, wearing a suit and yellow tie, smiling.

Sir Jan du Plessis Chair

Our journey continues

Supported by clear imperatives

in the letter of remit presented by the Secretary of State in November

We appreciate the wide-ranging engagement and interest from our stakeholder community as we work together to improve audit and corporate governance in the UK. Effective regulators should not be disconnected from the challenges of the real world and never lose sight that they are serving the public interest. This is at the forefront of my mind as I look to the year ahead.

We will continue our journey to becoming a modern regulator that serves the public interest and supports UK economic growth and competitiveness through strategic and impactful engagement and proportionate regulatory activity.

Handwritten signature in black ink.

Sir Jan du Plessis Chair

Working together

3. The FRC at a glance

The FRC has an important public interest role to enhance the quality of audit and corporate reporting and governance, while supporting the UK's economic growth and its international competitiveness. The FRC's Board and Executives remain focused on ensuring our current regulatory toolkit is used to best effect, working closely with our stakeholders. This includes setting proportionate standards, fostering a culture of continuous improvement and holding individuals and companies that fall short to account. This is important for stakeholders, large and small, across the country, from workers and pension holders to institutional investors and large corporate organisations. For more about our stakeholders and how we engage with them, see page 31.

Building trust brings better outcomes for all stakeholders

A diagram illustrating the FRC's regulatory model, showing "Strong independent regulator underpinning the system". This system connects: * Rigorous audit and Acting in the public interest leading to Better outcomes * Engaged investors and Better reporting quality also leading to Better outcomes * Better outcomes are "For all stakeholders" * Market confidence and Acting in the public interest leading to Better governance

Our objectives

Set high standards in corporate governance and stewardship, corporate reporting, auditing and actuarial work, and assess the effectiveness of the application of those standards, enforcing them proportionately where it is in the public interest.
Promote improvements and innovation in the areas for which we are responsible, exploring good practice with a wide range of stakeholders.
Influence international standards and share best practice through membership of a range of global and regional bodies, and incorporate appropriate standards into the UK regulatory framework.
Create a more resilient audit market through greater competition and choice.
Develop our organisation as a respected, independent, and high performing regulator; trusted to deliver best-in-class public interest.

4. Our Business Model

Our purpose

The purpose of the FRC is to serve the public interest by setting high standards of corporate governance, reporting and audit, and by holding to account those responsible for delivering them.

What kind of regulator is the FRC?

Our four faces of regulation demonstrate how the FRC operates as a regulator. These values are aligned with our core purpose: to serve the public interest by enhancing the quality of corporate governance, reporting, and audit, while supporting the UK's economic growth and its international competitiveness. In doing so, we help make the UK the best place in the world to start, grow and invest in a business.

A diagram illustrating "The Four Faces" of the FRC's regulatory model:

System Partner: Educating, collaborating, and supporting continuous improvement
Facilitator: Encouraging good practice through structured engagement
Supervisor: Supervision and monitoring of requirements, culture and behaviours
Enforcer: Investigating conduct and applying proportionate sanctions and directions

Our Values

Influential Through technical expertise and thought leadership, our people innovate to drive change. They develop themselves and others, speak up, value diversity and support others to do the right thing.

Fair Our people act in a professional, proportionate, consistent manner to ensure robust standards of decision-making and delivery, both internally and externally.

Effective Our people are decisive, accountable and collaborative when working with others to share information and experiences to improve outcomes.

Independent Our people challenge ideas, make evidence-based decisions and always act with integrity.

What we do

Regulatory Standards

Lead the development of public and technical policy, informed by comprehensive stakeholder engagement.
Set Codes, standards and guidance that support high-quality corporate reporting, corporate governance, and stewardship, audit, and actuarial work.
Drive innovation in the public interest for our stakeholders.
Influence international standard setting and collaborate with other regulators.

Supervision

Deliver our statutory responsibilities for corporate reporting review and act as the Competent Authority in respect of statutory auditors and the audit market.
Monitor the application of corporate reporting and audit standards and hold to account those that fail to meet these standards.
Promote improvement and innovation in corporate reporting and audit.
Promote a more resilient audit market.
Act as Shadow System Leader for local audit.

Enforcement

Drive the application of high standards in corporate reporting, audit and actuarial work through proportionate and risk-focused enforcement action where it is in the public interest.
Promote improvements and innovation in these areas by communicating clear and impactful messages through enforcement cases and publications, and through the setting and monitoring of effective non-financial sanctions.

Corporate Services

Support the regulatory divisions by providing a robust and resilient framework and expert support for the delivery of the FRC's wider objectives.
Support the FRC's ongoing work as an improvement regulator by acting as a trusted partner and adviser to the business, and through our ongoing partnership with Department for Business and Trade.

CEO division

Ensure an effective, accountable and transparent system of governance at the FRC.
Manage the strategic engagement across its stakeholder ecosystem, internal and external communications activity, social media channels and events programmes.
Project manage the delivery of projects at the FRC as we continue our role as an improvement regulator.

Our remit

Publicly listed companies by providing standards, best practice application and the UK Corporate Governance Code.
Auditors, actuaries and accountants' compliance with ethical and technical standards.
Asset owners, asset managers, and investment service providers through the UK Stewardship Code.
Relevant professional bodies, for example, the Institute of Chartered Accountants in England and Wales (ICAEW), the Association of Chartered Certified Accountants (ACCA), the Institute and Faculty of Actuaries (IFoA), the Chartered Accountants Ireland (CAI), and the Institute of Chartered Accountants of Scotland (ICAS).
Public bodies by supervision, standard setting, and enforcement subject to Local Audit and Accountability Act 2014.

Within FRC remit

Enforcement

Investigation and enforcement action against accountants and accountancy firms if it is in the public interest.
Investigation and enforcement action against statutory auditors.
Take enforcement action against members of a professional accounting body.
Investigation and enforcement against members of the actuarial profession in public interest cases.

Supervision

Periodic review of the annual report and accounts of the largest UK companies.
Review the audits of Public Interest Entities (PIE), Alternative Investment Market Quoted companies (>£200m), Lloyd's syndicates, UK-listed non-UK companies, and Major Local Audits.

Oversight

Recognise and provide oversight over professional bodies as supervisory and/or qualifying bodies.
Independent oversight of the Institute and Faculty of Actuaries (IFOA).

Standard setting

Setting auditing and assurance standards.
Setting UK accounting standards.
Setting Technical Actuarial Standards.
Set UK Corporate Governance and Stewardship Codes.

Where we are seeking additional powers

Enforcement

Enforcement powers over additional firms.
Powers to take enforcement action against company directors who are not members of an accountancy body.
Powers to enforce operational separation between audit and non-audit practices in the largest firms.

Supervision

Powers to compel actuaries to provide their actuarial work to us for review.
Powers to enhance competition in the audit market.

Oversight

Oversight powers of professional bodies in relation to accountancy services.

Outside remit

Enforcement of the UK Corporate Governance Codes.
We do not monitor or take enforcement action against non-members of accountancy bodies.
We do not take enforcement action in relation to insolvency work.
We do not review small and medium-sized private companies' accounts.

Currently delegated to Recognised Supervisory Bodies

Review and enforcement action related to private companies' audits.

Expansion of the PIE definition to bring review and enforcement of large private company audits into our remit.

5. Chief Executive's Report

This year the FRC's work has further built on its transformation since 2018 when Sir John Kingman led his seminal review into our role. Of the 50 recommendations Sir John made that fell to the FRC to undertake, we have now closed 47 with work on the remaining three recommendations underway. The FRC of today is a very different and much more effective organisation, but we are far from complacent. We are restless to continually improve and learn so we can carry on enhancing stakeholder trust and confidence in our ability to deliver for our public interest purpose.

As part of our continued improvement we need to not only consolidate the progress we have made in the past few years, but also position the FRC to rise to the fresh challenges and opportunities of the next few years. An important part of this is our role in promoting high standards whilst contributing to the UK's economic growth and competitiveness. I welcomed the latest remit letter for the FRC from the Secretary of State for Business and Trade in November that stressed the importance of this role.

These aims are not in conflict if done right. UK and international investors are clear with us that high standards support the UK as an attractive place to start, grow and invest in a business. But this regulation must be smart. It must be proportionate and targeted. It can't be a one-way ratchet and we must be mindful of the system of regulation (the stock) in addition to the merits of individual proposals. We can only do this well if we engage effectively with all those that have an interest in our work so we can understand the practical and real-world impact of our role.

A good example of our commitment to deliver on our public interest purpose was seen this year when we undertook the largest ever consultation on the UK Corporate Governance Code. This saw us engage with over 5,000 people representing businesses, investors, and other stakeholders. I welcome the support we received from a wide range of stakeholders for the approach we took to the revised Code. We listened carefully to feedback and dropped a number of previous additive proposals, mindful of the need to be proportionate and not add unnecessary burdens. I am encouraged that businesses we engage with are now moving forward in a practical way to understand what the Code means for them so they can meet the new provisions when they come into effect.

Having concluded this revision to the Code, I was keen this year to launch a review of the Stewardship Code, which pertains to the investor community of asset managers, asset owners and service providers. It is timely to undertake such a review after three years of practical operation of the 2020 Code. Key questions we want to pursue is whether it is driving the right behaviours, supporting good quality stewardship regulators, minimising unnecessary burdens and supporting UK growth and competitiveness. In doing so we will be working closely with other

Headshot of a bald man with glasses, wearing a light blue shirt and dark blazer.

Richard Moriarty Chief Executive Officer

UK market attractiveness

Strategic market engagement

Adaptation and growth

stewardship regulators; the Financial Conduct Authority, The Pensions Regulator, as well as the Department for Work and Pensions.

This year our regulation of audit has encouraged further improvement in audit quality. We have continued to promote the resilience, attractiveness and capacity of the UK audit profession through engagement with international partners and a holistic supervisory approach. We developed tools to support smaller audit firms to help build their capabilities to take on larger and more complex clients. We have had a busy year refining standards across our audit, accounting and actuarial work to deliver net benefits to businesses whilst making their accounts more useful for investors and others. The FRC also continues to be very active at the international level seeking to influence global standards to the benefit of UK business, investors and other stakeholders.

This year has seen us grow our capabilities to support government in tackling the serious challenges of the backlog in local audit. Working with our system partners including National Audit Office (NAO), The Chartered Institute of Public Finance and Accountancy (CIPFA) and the Department for Levelling Up, Housing and Communities (DLUHC), we helped develop the proposals for the government's way forward published in February based on a series of statutory backstop dates. We are well prepared to take on from DLUHC the role of shadow system leader for local audit where we will leverage our skills and expertise across the organisation to help tackle this critical issue of public interest.

Local Audit action

Enforcement is a part of every regulator's toolkit to help underpin confidence that the regime will hold those responsible to account and encourage system improvement through learning from the case studies. The public do not expect misconduct and serious errors that have a profound impact on the livelihoods of the investors, pensions and communities up and down the country to occur without those responsible being held to account. The past year has seen the FRC conclude a number of enforcement cases into individuals and firms. This included the conclusion of our investigation into the audits of Carillion plc. This year we saw fewer enforcement cases opened than previous years. It is too early to tell whether this is in part related to the improvement we have seen in audit quality in the larger firms.

The FRC must continue to change and challenge itself in order to ensure it is well positioned in the future to deliver on its public purpose remit and maintain the confidence of stakeholders. This year the FRC established an office presence in Birmingham where we aim to establish and grow a significant footprint.

Finally, to complement the progress the FRC has made, and will continue to make, as an organisation, I am keen to see the modernisation of our powers and legal authority. This is one significant part of the Kingman vision that remains unfulfilled despite strong and widespread stakeholder support for it. The case for it remains as valid today as it did in 2018 and arguably now more so. The FRC's toolkit needs to be brought into line with what other regulators expect as standard. What the delay in legislation will not do is distract us from using our current tools to the best of our ability. I am proud to lead an organisation of people so dedicated and committed to doing this and making a real difference to our public purpose.

Enhancing the toolkit

A handwritten signature.

Richard Moriarty Chief Executive Officer

Regulatory Standards

The Regulatory Standards division develops Codes, standards and guidance to support the delivery of high-quality work and innovation, through UK policy and influencing the development of international standards. This supports opportunities for British companies to get access to capital and in overseas markets by producing high quality and reliable information which sets out a company's prospects. Through thought leadership, we bring insight into teams and make optimal use of the feedback loop that comes from monitoring and regulatory activities undertaken by the Supervision and Enforcement divisions.

The division has contributed to key policy deliverables in support of the FRC's objectives, such as:

A revision of the UK Corporate Governance Code that balances underpinning trust and confidence in UK whilst keeping burdens on businesses to the minimum necessary.
A fundamental review of the UK Stewardship Code 2020 to ensure it supports growth and the UK's competitiveness.
A revised Ethical Standard for Auditors, driving high standards of ethical behaviour and independence and supporting trust in information reported to financial markets.

This work has been supported by public consultations, engagement with diverse groups of stakeholders, and delivered with a targeted, proportionate and balanced response to meet investor and stakeholder expectations. We will continue to ensure that this work is informed by a wide evidence base, and therefore draw on skills from across the FRC.

Highlights of the past year include the revision of the UK Corporate Governance Code, which saw the FRC's largest ever consultation. This exercise established revisions to the UK Corporate Governance Code that enhance transparency and accountability of the UK economy and corporate landscape and help support the growth and competitiveness of the UK and its attractiveness as a place to invest.

This year, we begin a fundamental review of the UK Stewardship Code. The Code has seen increased growth in the number of signatories, but as with the revised UK Corporate Governance Code, we want to ensure that it delivers transparency around what investors actually do, whilst supporting growth and the UK's competitiveness.

We have also continued to work with government to support key projects, like the non-financial reporting review and a process to endorse International Sustainability Standards Board (ISSB) Sustainability Standards for use in the UK, both commissioned by the Department for Business and Trade (DBT).

A key part of the division's work is engagement with international standard setting boards, which provide a single international framework for high-quality reporting and assurance of sustainability information. This engagement ensures that we are easing operational burdens and restrictions for our stakeholders across jurisdictions.

It is important that we engage regularly with other regulators both in the UK and internationally, to inform the development of multi-party policy and share good practice. We engage with technical policy colleagues from other organisations to ensure that we support the development of sustainable and effective solutions to challenges.

Supervision

The Supervision division delivers the FRC's supervision and monitoring obligations in respect of audit, accounting and corporate reporting. As the supervision function of an improvement regulator, it promotes innovation and improvement by exploring good practice to raise the quality of audit and corporate reporting for all our stakeholders.

This year, our Annual Corporate Reporting review focused on providing guidance and expectations in corporate reporting to ensure high-quality outputs and disclosures that offer stakeholders and investors the information to make useful decisions. High-quality reporting of key matters is important for users of annual report and accounts. While the overall quality of company reporting remains consistent, there are areas for improvement. In addition, the UK's largest private companies, which are of significant economic value to UK growth and competitiveness, have seen a mixed quality of reporting.

Disclosure of climate-related metrics and targets continue to be a focus of our stakeholder community. We have produced a thematic review outlining the need for clear and concise reporting in these areas, which are increasingly important to investors and other stakeholders.

We have continued our assertive and balanced approach to audit firm supervision, monitoring not only requirements but challenging culture and behaviours as well. Improving audit quality is at the heart of our purpose to promote integrity and choice in the audit market, which plays a vital role in ensuring confidence in the UK economy. While the majority of audits inspected for the largest firms continued to improve, we are disappointed with the overall results from some smaller firms and lack of progress in some areas. Work remains to ensure that firms do not fall behind the standard of their peers, and ensure responsive and high-quality audits.

The FRC recognises that smaller firms, or those new to the Public Interest Entity (PIE) market, often face challenges in meeting regulatory expectations. It is important that all firms step up to improve the overall health and resilience of the audit market. We continue to develop tools and guidance, to provide support for those firms to develop and maintain high standards of audit quality as they enter and grow in the PIE market. Through this approach we hope to increase their audit capabilities and capacity which will, over time, increase competition while maintaining high standards of audit quality.

This year we also signed three agreements with international regulators (New Zealand, Switzerland and Australia) to mutually recognise their audit qualification in the UK and the UK qualification in their jurisdiction. These developments allow auditors to work more easily in each country, boosting the attractiveness of their audit markets.

Finally, the development of our supervision of the professional bodies continues. Our new Professional Bodies Supervision model will deepen and strengthen our approach, building on the existing successful FRC supervision model for audit firms, and ensure we maintain robust and proportionate regulation of the professional bodies.

Our public report on the supervision of the professional bodies has evolved to be more impactful and to reflect the transition to the new supervisory model. It is important that professional bodies continue to promote the importance of maintaining audit quality across the whole audit market, which can be underpinned by increased auditor education and training.

Local Audit

The government intends to establish the Audit, Reporting and Governance Authority (ARGA) as system leader for local audit with the specific objective to ensure the local audit system operates effectively. As we await legislation the FRC is one of six bodies with statutory responsibilities for the regulation of local audit, and since 2023 is the ISSL. This role aligns with our purpose to serve the public interest by promoting high standards of financial reporting, governance and audit, and builds on its existing responsibilities in the local audit system related to standard setting, supervision and enforcement.

The FRC's work as Incoming Shadow System Leader (ISSL) is led by the Local Audit team but the work is a cross-organisation priority. It involves bringing together teams from across the FRC to ensure that proposals to tackle the unacceptable backlog in local audit opinions are practical, workable and implementable. The Executive Director for Supervision chairs the Local Audit Liaison Committee and the Local Audit team has the technical skills and knowledge to deliver on our priorities of restoring timely, high-quality financial reporting and audit.

This year, the FRC has solidified its position as ISSL with the system, with preparers, regulators and auditors recognising its expertise and leadership. In particular, the FRC supported the Department of Levelling Up, Housing and Communities' (DLUHCs') and the National Audit Office's (NAO's) consultations on proposals to tackle the backlog in local audit. Utilising our experience running consultations to facilitate engagement, we ensured that views were heard from across the stakeholder ecosystem.

Enforcement

The Enforcement division protects the public interest, maintains confidence in the regulatory regime and deters breaches of relevant requirements through holding to account auditors, accountants, accountancy firms and actuaries in support of high standards in audit, accounting, corporate reporting and actuarial work.

Failures can directly damage the interests of a broad range of members of society including employees, creditors, and pensioners as well as impair growth by damaging the trust that investors and organisations have in the UK as a good place to do business. It is important for the FRC to hold relevant parties to account.

The Enforcement division is responsible for:

Conducting investigations and taking appropriate, risk-focused enforcement action where it is in the public interest.
Communicating clear and concise messaging through enforcement outcomes and publications to promote improvements.
Improving quality by setting and monitoring effective non-financial sanctions.

The division's work principally contributes to the role of the FRC as an improvement regulator and educator through imposition of non-financial sanctions, and the publication of investigation outcomes detailing the facts and circumstances of breaches.

FRC enforcement powers are exercised fairly, proportionately, consistently and efficiently, with appropriate oversight and regular review. The purpose of sanctions is to protect the public interest, uphold standards and confidence in the regulatory regime and UK economy, and deter breaches. Sanctions are not only imposed to create accountability, but also inform and encourage better behaviours, judgements and quality.

Nevertheless, we remain mindful of the challenges in the financial reporting environment. Through guidance and published outcomes of serious or significant breaches found, we help preparers and accounting, audit and actuarial professionals manage these challenges. Compared to the thousands of audits conducted annually, and the numbers of Audit Quality Review (AQR) inspections completed, enforcement action continues to be taken in very few instances.

This does not mean a change in approach. The FRC will continue to expect the high standards that serve the public interest and will work closely with stakeholders to ensure better behaviours, judgements and quality remain a focus. The Enforcement division will continue to operate in partnership with the Regulatory Standards, and Supervision divisions to improve quality and ensure better outcomes for the public and our stakeholders.

This year the Enforcement division has:

Settled KPMG and Carillion audit investigations and published detailed summary outcomes of the investigations.
Published outcomes collectively with findings in key audit areas.
Published our fifth Annual Enforcement Review (AER), including a chapter setting out our expectations of required cooperation and examples of the level of exceptional cooperation that results in discounted sanctions.
Reduced the case portfolio from a high of 52 in autumn 2021 to 35 at 31 March 2024.
Met our target 2 Year KPI ¹ for 50% of cases in 53% of investigations.
Met our target 3 Year KPI ² for 80% of cases in 88% of investigations.
Contributed to the FRC's international outreach, influence and connectivity by chairing the sixth Enforcement Workshop of the International Forum of Independent Audit Regulators (IFIAR) with 99 attendees from 34 IFIAR member countries.
Achieved the above against a backdrop of modest and reduced division headcount growth from 67 ³ to 70 in the year to March 2024 (compared to division headcount growth from 62 to 67 in the year to March 2023).

Corporate Services

The Corporate Services division supports the work of the FRC by providing professional HR, finance, risk, legal, IT, economic advice and research, and data and analytics services to ensure that the organisation is well run and complies with all relevant laws and duties. It is important that the work of the FRC reflects challenges in the corporate and economic environment. It has been pleasing to see year-on-year improvements across all performance indicators.

This year the Corporate Services division has continued to develop the FRC's role as a public body. The right thing for the FRC this year was to pause our growth and look to do more with the resources that we have. Our staff recruitment and retention policy enables the delivery of the strategic priorities of the FRC. We will make sure we are focusing on the right priorities, embedding people into the organisation and looking to unlock efficiencies and synergies.

We have increased our regional footprint by opening a new office in Birmingham. The UK Endorsement Board has been relocated to a new office in London but continues to work alongside the FRC in its operational priorities.

The division has continued to mature its resilience with an updated business planning framework and approach to business contingency to ensure that the FRC system reflects the needs and challenges of a modern regulator. We have enhanced our information management with a holistic assessment of information records and ownership, and our data privacy framework and policies. In partnership with the Audit & Risk Committee we have refreshed our risk appetite and principal risks, against the Orange Book, which sets out main and supporting principles for risk management in government, and evolved the application of the three lines of defence assurance model.

CEO Division

The CEO Division underpins the strategic functions from across the FRC that drive and support the FRC's objectives through strong governance, project and portfolio management discipline, impactful stakeholder engagement, and influential communications to support the FRC's work as a modern, dynamic regulator.

Work this year has focused on ensuring that the outputs and engagement of the FRC are targeted and streamlined. Stakeholders have previously complained about the sheer volume of FRC output, as well as the complexity and accessibility of some of its work. In response, we have established a more strategic approach to stakeholder engagement and a more disciplined approach to the planning, development and publication of output. We remain focused on ensuring that our current regulatory toolkit is used to best effect for this purpose, working closely with our stakeholders.

Our Strategy & Change function continues to work alongside colleagues within the FRC and across government to support the delivery of change initiatives and continue our journey of being an effective, modern, improvement regulator. Within Strategy & Change, the Project Management Office serves to assure the quality of project management approaches and support decision makers by providing consistent project tools, templates, reporting and governance.

This year we will undertake a review to ensure that the purpose and priorities provide the best value and to both the organisation and our stakeholder community. We recognise the current business and corporate environment, and, where possible, we will reduce unnecessary burdens on UK businesses.

This is consistent with the government's proposed approach to 'Smarter Regulation' and the 'Growth Duty', in which regulators are expected to have regard to the drivers of sustainable economic growth while retaining the flexibility needed to appropriately balance the Growth Duty with their other duties and objectives.

We will continue to demonstrate that the FRC is a regulator with impact and influence at the heart of UK corporate life and emphasise the importance of a four faces regulatory model to promote proportionate regulation in the public interest across the broad remit of the FRC.

Smarter regulation, not more, is at the heart of the public interest as it contributes to the growth and competitiveness of the UK, attracting capital to be deployed in better governed and assured business models. Promoting high standards of corporate governance, reporting and assurance are key to underpinning trust and integrity in UK business to attract investment and confidence from investors globally.

6. Strategic Priorities for 2024 to 2025

Overview

Our priorities in 2024/25 will focus on continuing our transformation to a modern, best-in class-regulator that establishes high standards and accountability to support public trust in the UK economy. Each division of the FRC will organise its work and deliverables to support this mission and promote growth and competitiveness in UK markets.

Regulatory Standards

Introduce a comprehensive review of the UK Stewardship Code, co-ordinated with other members of the Stewardship Regulators Group: the Financial Conduct Authority (FCA), the Department for Work and Pensions (DWP), The Pensions Regulator (TPR) and HM Treasury.
Establish a new technical actuarial standard to drive high-quality work carried out in collective money purchase pensions.
Publish a revised technical actuarial standard to drive high-quality work in the insurance sector.
Provide support to government to allow the endorsement of ISSB Sustainability Standards for use in the UK, and work to support the finalisation of new international assurance, ethics and independence standards for sustainability engagements.
Introduce a review of the Wates Principles to provide a modern framework to help large private companies raise their standards of corporate governance.
Build capacity to deal with the increased use of data, technology and Al impacting on the policy landscape in all regulated sectors.
Introduce revisions to Auditor Reporting Standards (ISA (UK) 700 series).
Outline a periodic review of FRS 101 (Reduced Disclosure Framework), including consulting on underlying principles.
Establish research to support reducing burdens on SME companies carrying our supply chain reporting.
Introduce a consultation on a revised Audit Evidence Standard, to align with changes at the international level.
Publish a new Technical Actuarial Standard to drive high-quality work in Social Security Programmes.
Deliver next milestones in our major projects including our Market Review and Company and Organisational Data Explorer (CODEX).

Supervision

Continue our forward-looking supervision of audit firms, including Registration of audit firms and responsible individuals who undertake PIE audit work, to improve audit quality and to hold them accountable.
Continue to build capacity and capability to deliver improved audit quality at the Tier 2 and 3 firms.
Supervise the effectiveness of the application of the updated FRC's Ethical Standard and new International Standard of Quality Management 1/2.
Develop an audit market monitoring function to assess current and future risk in the audit market.
Assess the resilience of the audit firms and supervision (voluntary) operational separation, which will contribute to a more resilient audit market.
Collaborate with regulatory partners in the monitoring of mandatory climate risk disclosures and additional reporting requirements.
Continue to build capacity and capability to embed the new supervisory strategy for the professional bodies, and the education and training for audit and actuarial qualifications.
Work with international partners to recognise mutual recognition of overseas qualifications.
Deliver, with key partners such as DLUHC, NAO and CIPFA a plan to help reduce the backlog in local audit and, as Interim Shadow System Leader, advise on steps to put the local audit market on a more sustainable trajectory.

Enforcement

Conduct investigations and take risk-focused and proportionate enforcement action where it is in the public interest.
Promote improvements by communicating clear messages through enforcement outcomes and publications such as the AER.
Set, and with Supervision colleagues monitor, effective non-financial sanctions designed to improve quality.
Liaise with and share information as appropriate with colleagues in our Regulatory Standards and Supervision divisions in support of our holistic approach to regulation.
Maintain focus on timeliness and consistency arising from the growth of published outcomes, particularly those conducted under the Audit Enforcement Procedure (AEP).
Continue to obtain input from experienced accounting and audit professionals at earlier stages.
Provide ongoing technical and skills training and keep abreast of and upskill the division on emerging issues including sustainability reporting and generative Al.

Corporate Services

In line with our revised staff trajectory, develop a skills mapping process to augment the existing succession planning processes.
Embed the value and accessibility of advisory support for decision making.
Continue the process of establishing our new office and staff in Birmingham.
Prepare managers and staff for the leadership challenges of a new London location and the Birmingham office and ways of working and developing targeted interventions.
Embed information asset records, enhancing business awareness, access controls and data privacy.
Test and revise plans for cyber and information risk.
Migrate all FRC teams to SharePoint.
Update our IT estate and back-office systems.
Support FRC divisions with data (sourced internally and externally, assisted by developed reporting tools), and with sector and economic analysis.
Manage FRC finances and explore long-term funding options.
Progress to the next step of risk maturity as planned.
Develop the governance and oversight reporting with the DBT and working with other Arm's-length bodies.

CEO Division

Supporting the divisions of the FRC to deliver its objectives and activities through targeted and high-quality stakeholder engagement that delivers impact and influence.
Mature the process of reporting and planning in strategic priorities to improve portfolio visibility, decision-making and project delivery.
Introduce an effective new project management software system to replace a significant proportion of current processes with a professional, supported solution, greatly reducing risks.
Develop a three-year strategy to establish the FRC as a best-in-class regulator for project management and achieve the best possible outcomes in the public interest within our environment and remit.

7. KPIs

In measuring our performance, a series of targets are agreed and monitored during the year. The FRC's Executive Committee regularly receives detailed management information which underpins each of the published KPIs. Our 2023/24 performance against some of the key measures is shown below together with prior year performance. We have included a Red, Amber, Green (RAG) system to signal the level of risk.

Category	Measure	Target (FY)	2023/24 (FY)	2022/23 (FY)	RAG ⁴
Supervision and Monitoring	Number of Audit Quality Review (AQR) Inspections completed. ⁵	154	137	143	✅
	Number of Corporate Reporting Review (CRR) reports opened.	240-260	243	260	✅
	Complaints against professional bodies for auditors, accountants and actuaries investigated and responded to within six weeks.	75%	90%	81%	✅
	Constructive engagement cases concluded within 12 months. ⁶	100%	38%	100%	🟡
	PIE auditor registration applications which do not raise any compliance issues will be processed, and a decision taken, within 25 working days of the date on which all required documentation and information has been submitted to the FRC.	100%	100%	N/A	✅
Enforcement	Enforcement cases concluded, settled, or closed within two-year target. ⁷	50%	53%	75%	✅
	Enforcement cases concluded, settled, or closed within three-year target. ⁷	80%	88%	86%	✅
Financial and operational performance	Operating costs against budget.	£61.3m	£59.6m	£51.1m	✅
	Recruitment (staff) against budget. ⁸	533	477	443	✅
	FRC complaints responded to within service level agreement timeframe.	100%	100%	100%	✅

8. Our People and Culture Framework

People are at the heart of our organisation, and we are focused on offering high-quality employment and professional development opportunities to all FRC employees. For the FRC to demonstrate its role as a modern regulator, it requires a workforce of experts and professionals to guide and develop the evolution of the sectors we regulate or oversee.

In recent years, the FRC has demonstrated significant growth in anticipation of statutory expansion. With that expansion agenda now beyond the term of the current Parliament, and in reflection of the current economic pressures that many of our stakeholders face, this coming year will be used as a period for consolidation, implementation of new strategic processes and improved gearing of existing ones where possible. From a people perspective, this means that we decided to pause our headcount growth, and agreed new hires will primarily be in our Birmingham office, in line with the levelling-up agenda mandated to us by the government.

Rationalised growth

Our hybrid working programme is now integrated across the organisation, allowing our people to combine the benefits of working from home with time in the office, which allows for collaboration and working together in person as needed. There is a well-established minimum expectation of 40% of the working time to be office-based and this may be higher for some roles, including more senior leaders.

Flexible working

A full legal review of all our people policies was last undertaken in August 2023.

Staff wellbeing

The FRC remains committed to the wellbeing of our staff. We provide employees with access to online GP services, online physiotherapy, counselling and legal advice services. We also host an extensive series of webinars and workshops to improve their health and wellbeing.

Health and safety

We provide a healthy and safe working environment for all our staff and visitors. We have a dedicated team of fire marshals, first aiders and mental health first aiders to support the staff and record any incidents. Per employee, the average working days lost to absence for the 12 months to March 2024 was 4.2 days (2023: 4.0 days).

Talent development

We continue to invest in the development of our employees. Since the last Annual Report, over 39 staff secured places on structured programmes of leadership and management development. We have embedded a culture of learning and talent development across the organisation and continue to allocate six days per year to learning and development activities, with the potential for more with the agreement of an individual's manager. Of 477 employees, 303 are members of professional bodies and 35 employees are working towards professional qualifications.

All FRC staff are entitled to two days of paid volunteering or Corporate Social Responsibility leave per year. We offer all employees the opportunity to make regular donations, tax free, straight from their pay to any UK registered charity via the Payroll Giving scheme.

Staff retention

Over the last year, attrition has remained low with a voluntary turnover of 8.6% and involuntary turnover of 1.9%. However, given the ongoing competitive employment market, we keep this under constant review. We have also had 15 members of staff return from maternity or parental leave this year. Internal movements and promotions continue to provide an opportunity for our people to develop their career, and of the 107 vacancies filled in 2023/24, 47 of them were internal appointments. We also continue to review and adjust the shape of our organisation as we grow, further developing our workforce planning strategy. In June, as well as the annual pay remit, the government introduced additional public sector guidance on civil service pay, which includes the FRC in our role as an Arm's-length body. In line with this announcement, we provided our employees with a one-time recognition and cost of living payment, recognising the pressures on our colleagues.

Strength from within

Diversity and inclusion

Diversity and inclusion (D&I) continues to be important at the FRC. Our three-year strategy of 2021/22 is now embedded across the organisation. Our gender pay gap now sits at 2.9% (median figure) and our mean figure has improved from 10.7% to 10.4% which equates to a 13.5% points reduction since

This continued reduction in our mean gender pay gap reflects the increasing number of women at all job levels in the organisation.

13.5% points reduction in 6 years

Our D&I network groups continue to gain traction, and all have an allocated executive sponsor. We continue to celebrate events and hold educational sessions in relation to the groups throughout the year. The FRC provides a range of learning and development opportunities including active bystander training for all employees. In addition, we offer inclusive language and career development training to all staff and encourage staff to blog about their own lived experiences and has a focus on our Values and Behaviours. We have partnered with the Business Disability Forum to provide more support to managers, where they are faced with questions from disabled employees.

Additionally, the FRC is a signatory to the HM Treasury sponsored Women in Finance Charter. The FRC reviewed the central Government guidelines on Impartiality and External Expenses related to Diversity and Inclusion to ensure alignment with the civil service.

Women in Finance Charter

The graphic shows circular text 'Women in Finance Charter' within another circular outline.

Disability Confident

In 2020, the FRC created a working group on disability, which recently became the EnAble Network. The remit of the EnAble Network is to:

Foster an environment of inclusion, candour and openness within the FRC regarding disability and how these intersect with colleagues' other interests and experiences.
Emphasise how better awareness of disability issues helps the FRC fulfil its values of being influential, effective, fair and independent.
This year we have commenced working towards the Disability Confident Level 2 Accreditation which is sponsored by the Department of Work and Pensions.

Inclusive recruitment

The FRC is a signatory to the government's Disability Confident scheme and is committed to providing job applicants with a disability with a guaranteed interview if they meet the minimum requirements in the job advert.

In addition, reasonable adjustments requested by applicants are considered as a matter of routine.

The "disability confident COMMITTED" logo.

A logo featuring a square with three check marks, text reads "disability confident" and below it "COMMITTED".

9. Section 172 and Stakeholder Engagement

Consideration of stakeholders' interests has always been integral to the work of the FRC and in its decision-making. Directors are fully aware of their responsibilities to promote the success of the company in accordance with Section 172 of the Companies Act 2006.

The FRC's Stakeholder Engagement and Corporate Affairs team delivers high-quality, strategic and targeted engagement with our stakeholders to increase the depth and impact of our engagement and communications activity. Our activity is driven through engagement via roundtables, bilateral meetings, speaking engagements and conference attendance, media publications, podcasts, press notices, social media, and webinars.

Our approach to stakeholder engagement focuses on:

Developing impactful and strategic relationships throughout our regulatory ecosystem.
Creating a network of senior corporate representatives that help advise and challenge the FRC strategic output.
Positioning the FRC as a modern and effective regulator that serves the public interest and supports UK growth and competitiveness.
Gathering input into policymaking and consultations to reflect the UK business environment.
Driving awareness, understanding and engagement with our Codes, standards and best practices.
Ensuring that the FRC is a part of relevant decision-making bodies and groups.

Our key stakeholders include companies, institutional investors, auditors, actuaries, accountants, and their respective professional bodies, regulators and government. Our stakeholder ecosystem also includes retail shareholders, suppliers, employees, customers, communities, pensioners and savers, and financial institutions. All our stakeholders have an interest in the sustainability, growth, and competitiveness of UK markets through the health and robustness of companies and other organisations in our regulatory ecosystem.

10. Environmental Impacts

Alongside mandatory Streamlined Energy and Carbon Reporting (SECR) disclosures, we have made voluntary disclosures aligned with Task Force on Climate-related Financial Disclosures (TCFD) and supporting industry specific disclosure topics and metrics for Professional Commercial Services companies. This is to exemplify best practice and in line with Greening Government Commitments.

You can find our disclosures on the following pages:


Data handling and data security	p35	Ethics and compliance	p35
Our People	p28	Professional Integrity	p36

Governance

The FRC Board has ultimate responsibility for the FRC's consideration of, and response to, climate change and other environmental issues including the nature and extent of the principal risks to our strategic objectives. The Audit & Risk Committee has a delegated responsibility from the Board for reviewing the full risk register, looking at all current and emerging risks to our strategy and objectives.

Our Board, Committee and Executive Committee report templates were also updated this year to include a dedicated section and questions for report writers on ESG considerations. The board made sure to consider ESG implications in the UK Corporate Governance Code.

We also support our sustainability and environmental initiatives through:

Our role as secretariat to the UK Sustainability Advisory Committee and the newly established Technical Advisory Committee to support the provision of high-quality and trustworthy information.
Collaborating with the FCA in the monitoring of mandatory climate risk disclosures.

Strategy

Since conducting our initial assessment of climate change risks in 2022 in line with the TCFD, our central risk team has undertaken a series of workshops to identify any emerging climate change risks or opportunities for the FRC. Our assessment from these workshops is that the FRC is not materially exposed to the physical risks of climate change in the short and medium term and that climate change does not represent a threat to our viability or ability to operate.

Despite this, to embed climate-based risks into our business continuity framework we carried out a climate-based scenario exercise in 2022, and look to carry out more tests in future that are proportionate to our risks of disruption. As we look forward to the relocation of the FRC's London office, we are working with Government Property Agency (GPA) to ensure that sustainability credentials and resilience to climate change are informing our decisions towards the establishment of the new office.

Risk

We operate a bottom-up approach to risk, considering risks and opportunities at all levels of our operations from individual project discussions through to divisional and organisational risk identification workshops. This information feeds into the risk register, which is overseen by Executive Committee, the Audit & Risk Committee, and ultimately the Board for any risk assessed to be a principal risk.

The FRC recognises the growing demands for meaningful, assured and comparable sustainability reporting and significant implications that these demands will have for businesses and investors in the UK.

More information on the FRC's risk framework and processes can be found on page 46.

Metrics

The FRC occupies one floor of a multi-tenanted, externally managed building and as such, we are unable to make unilateral changes to the energy and water systems in the office, which makes it challenging for us to set attainable quantitative targets for the reduction of our own electricity, gas and water consumption.

We also collect data on IT waste, single-use plastics, paper and business travel, which we provide to government as part of the Greening Government Commitments. We have been collecting this data for the last two financial years, which has enabled us to identify and promote positive trends in our consumption and waste. Unlike previous years, we are currently unable to provide data on our energy usage and emissions produced by our office at 125 London Wall. This is due to the external building management lacking the systems to produce the data.

Currently we do not have any data on energy or waste management for our Birmingham site or the UKEB site on South Colonnade. The South Colonnade site, is in a government hub and only occupies a small site. The new FRC site in Birmingham is a small temporary office and we will endeavour to collect data on travel, energy and waste management, once it is in a permanent location.

	2023-24	2022-23
Paper consumption (A4 reams equivalent)	631	444
Single-use plastic consumption (no. of items)	4,844	2,615
Business travel (km)	1,756,283	603,845
Business travel emissions (total kg CO2e)	419,026	105,224

Energy consumption

FRC business travel has again increased significantly this year as invitations to meet with other regulators and speak at international events have continued to increase, returning to pre-pandemic levels. This year has been a full year of international events and the resumption of in-person Third Country Inspections. However, all business travel complied with the published travel policy and staff are actively asked to weigh the environmental impact of their travel against the potential benefits to the FRC before making their travel arrangements.

Waste management

The FRC has a policy on the disposal of IT equipment and this year, we have engaged with an external contractor to manage a large-scale assessment of our IT equipment, identifying items to sell, refurbish, recycle or send to landfill in line with the Waste Electrical and Electronic Equipment Regulations 2013.

Due to higher office occupancy, our paper consumption has increased this year against the previous year's levels but is still well below pre-pandemic levels. Our single-use plastic consumption increased significantly, this will most likely be due to the higher office occupancy. Last year we had a surplus of office stationery due to leftover stock from the pandemic leading to less demand, this will have impacted our use of office supplies this year. We continue to consider non-plastic alternatives, particularly for our office stationery items, and have refreshed our communications to staff about the need to reduce paper and single-use plastics consumption.

Due to the FRC occupying one floor of a multi-tenanted, externally managed building, we are unable to source more data concerning our waste and recycling, however we will endeavour to gather this information going forward.

Energy efficiency measures

In making plans to reduce our consumption, we remain mindful that cloud computing is capable of significantly improving energy efficiency and reducing greenhouse gases compared to traditional local servers. We are currently in the process of conducting a review of FRC data and transferring all relevant and principal data to cloud servers.

11. Ethics and Compliance

Data handling

Information and data loss is recognised as one of the FRC's principal risks and as such, is included on the Principal Risk Register. Executive Committee and the Board, supported by the Audit & Risk Committee, keep those risks and controls in place to mitigate those risks under review on a regular basis. We keep a separate Record of Processing Activities (ROPA) and an Information Asset Register.

We operate an internal Information Governance Group (IGG) that meets quarterly to review, assess and improve operational oversight and coordination of information governance and controls. The remit of the IGG allows it to support the engagement of staff with and commitment to information handling, and to identify areas of concern at an early stage for escalation to Executive Committee or the Audit & Risk Committee if appropriate.

We understand the importance of privacy and maintaining trust and confidence in our data handling processes. Our General Counsel Team maintains our privacy and data retention policies and procedures, working closely with the Data Protection Officer. Our General Counsel Team also oversees responses to all GDPR and Freedom of Information Act (FOIA) requests, and compliance with application legislation, including UK GDPR. All FRC staff and Board members have received mandatory training on relevant aspects of UK GDPR, online security risks and FOIA. Through our processes and procedures, we are able to provide assurance that personal data is handled and processed in line with the seven UK GDPR Principles. Information on our privacy policies can be found on our website.

We ensure we have an up-to-date IT architecture in place to defend the FRC against data security and data loss threats that may occur when staff work in the office or at home. This is a continuous process. As a result of our reviews, numerous enhancements were made to anti-virus and malware configuration settings and patching processes. Threat-managing features were enhanced and the ability to take action on discovered threats was also introduced.

We also tested how we would respond to any malicious activity by carrying out extensive testing over a three-month period, including how our monitoring systems would notify us of suspicious activity. During 2022/23, 22 information incidents were reported. None of the incidents were reportable breaches.

Managing conflicts of interest

All FRC staff and non-executives must comply with the Code of Conduct and make up-to-date, full disclosures regarding their external interests, and any gifts and hospitality received, to ensure that our work remains free of bias. New staff must disclose their relevant interests prior to contract. Staff are not permitted to take part in work relating to an entity they have worked for in the last five years, unless an exemption request has been viewed and approved by a member of the Executive Committee. In accordance with the policy, the People Committee regularly reviews disclosures made by the Board members, Executive Committee, Senior Advisers and Advisory Panel Members. These are published on the FRC website.

Bribery policy

UK legislation on bribery applies to the FRC, its staff and members of the governance structure. The FRC Code of Conduct, which staff and members of the governance structure must follow, sets out that all must not:

Bribe another person, which includes offering, promising or giving a financial or other advantage.
Accept a bribe, which includes requesting, agreeing to receive, or accepting a financial or other advantage.
Facilitate or condone an act of bribery.

Whistleblowing

The FRC maintains its own whistleblowing mechanisms and internal investigation procedures. The FRC's central complaints function conducts internal reviews into any external complaints received about the FRC itself and an Independent Complaints Reviewer may be appointed to review the FRC's processes should a complainant have any outstanding concerns.

Litigation

During 2023/24 the FRC suffered no monetary losses as a result of legal proceedings associated with the FRC's professional integrity, which would include negligence of duty, malpractice, breach of contract, fraud, corruption or bribery.

Gifts and hospitality

In accordance with the policy, the People Committee regularly reviews disclosures made by Board members and Executive Committee. These are published on the FRC website quarterly.

Modern slavery

The FRC Board annually reviews our Modern Slavery Statement. The FRC does not condone any activity that constitutes modern slavery or human trafficking under the Act. Our suppliers (and supply chain) should maintain the same approach and we have policies and procedures in place to minimise the risk of modern slavery occurring. Our Modern Slavery Statement is available to view on our website.

Payment practices

The FRC complies with the public sector procurement rules as stipulated in the Public Contracts Regulations

The FRC's supplier relationships seek to deliver successful, sustainable solutions. New and existing suppliers must continuously align their approach, processes and procedures to the core principles relating to minimising risk and compliance with regulations and legislation. In addition, suppliers should strive for good practice relating to information security, financial management and business continuity. It is FRC policy to pay suppliers when or before payments become due and we endeavour to pay suppliers within 21 days of the date of invoice (achieved in 2023/24: 21 days).

12. Managing Complaints to the FRC

The FRC reviews complaints and referrals received from the public in line with its role in encouraging confidence in the integrity of accountants, actuaries, auditing and corporate reporting. The majority of the complaints we receive that are within our remit concern regulated activities. A small number of complaints are also received about the FRC. Many complaints we receive are outside of our remit; these are passed on to the relevant authorities or bodies that may be able to assist wherever possible.

The FRC has a centralised complaints function to triage complaints and ensure that they are handled, responded to and resolved appropriately, promptly and consistently.

This year, we introduced a new complaints workflow system and a new online complaint form, and undertook continuous improvement reviews of all policies, procedures and processes to ensure that they continue to adapt to the changing needs of both the organisation and complainants, and incorporate best practice in complaint handling.

Following receipt, complaints are triaged to determine whether they fall within our remit and, if they do, they are then referred for consideration to one of the teams below:

Corporate Reporting Review: responsible for reviewing accounts of listed, UK Alternative Investment Management-quoted, and large private companies, as well as limited liability partnerships, to determine whether they have complied with relevant accounting and reporting requirements as set out in the Companies Act 2006.
Case Examiner: responsible for identifying cases that may fall within the remit of one or more of the FRC's disciplinary or enforcement procedures. The AEP in relation to suspected breach by statutory auditors of Relevant Requirements and the Accountancy and Actuarial Schemes in relation to suspected professional misconduct by members of the chartered accountancy and actuarial bodies in public interest cases. These may be referred to the FRC's Conduct Committee for a decision as to whether to open an investigation by the Enforcement division under the applicable procedure.
Professional Bodies Supervision: responsible for providing independent oversight of the professional accountancy and actuarial bodies, considering the way a body has handled a complaint that was made to it.

Our published policies and complaints forms include clear guidance on how complaints will be dealt with, including timelines.

Complaints in 2023/24 (end of February 24)

We received 476 complaints during 2023/24, summarised below:

	Number
Brought Forward (within remit)	6
Incoming complaints	476
Outside remit	405
Closed/resolved complaints (within remit)	58
Carried forward (within remit)	19

The types of complaint received are broken down below.

Complaint nature		Number
Conduct or performance of accountant	regulated	55
	unregulated	64
	unknown	101
Conduct or performance of auditor		44
Financial reporting		57
Actuarial work		1
Actions of professional body		67
Insolvency issue		2
Other/unknown		76
FRC		9

The handling time across all cases closed in 2023/24 were an average of 1.5 working days to send an acknowledgement and an average of 3.2 working days for the outcome.

Of the 476 complaints received, 71 were referred to the relevant teams within the FRC for further review, with 405 complaints being outside our remit. The actions taken in respect of the complaints considered by the FRC during 2023/24 are set out on page 39.

Where complainants raise issues outside of the FRC's remit, they are referred to other bodies as appropriate.

Corporate Reporting Review

The CRR team received 32 complaints related to corporate reporting matters during the year, of which 17 related to matters in the accounts, Directors' report or strategic report, which we pursued with the relevant company, or we are currently analysing.

Complaints received 2023/24

Financial statement related	Number
Open	9
Improvements secured note or/and narrative	3
No breach	2

Strategic report related	Number
Open	1

Not pursued	Number
Entity or matter not in scope	6
Insufficient merit to pursue	5

Complaints came from a diverse range of parties including private individuals and investors, and relate to companies ranging from private and small AIM to FTSE 100. Consistent with our usual practice, and subject to any relevant confidentiality restrictions, information relating to some complaints was shared with, or referred to, other relevant authorities including the FCA and the Prudential Regulation Authority (PRA).

At the beginning of the year, there were five open cases relating to complaints about corporate reporting matters received in earlier years. The actions taken during 2023/24 in relation to these complaints are illustrated below.

Cases brought forward 1 April 2023

Financial statement related	Number
Primary financial statement restated	2
Improvements secured note or/and narrative	1
No breach	1

Strategic report related	Number
Open	1

Case Examiner

Case Assessment (formerly Case Examination and Enquiries) opened one complaint case this year. Four complaints were also received in relation to matters for which Case Assessment had existing cases open.

Two complaint cases were closed by the team this year:

One case, in relation to audit, where the decision was made to undertake constructive engagement with the audit firm.
One case was closed with no further action taken as our enquiries found that there was no basis or information to support the complaint.

Professional Bodies Supervision

Professional Bodies Supervision received 40 complaints about the professional accountancy and actuarial bodies that we supervise, and brought forward one complaint that was ongoing from the previous year. The team conducted a full review of the professional bodies' relevant process in six of these cases, with four further matters still under review as of 31 March

The remaining 34 matters either fell outside the team's complaints handling full review remit, or the complainant had not first exhausted the professional accountancy body or actuarial body's complaints procedure. Professional Bodies Supervision responded to 92% of complaints within six weeks.

Further information on complaints received by Professional Bodies Supervision, including trends, can be found in our report on our supervision responsibilities for 2023/24, due to be published later this year.

Whistleblowing to the FRC as a prescribed person

Public interest disclosures

Whistleblowing is the term used when an employee passes on information concerning suspected or known wrongdoing by their employer (also known as 'making a disclosure'). The Employment Rights Act 1996, as amended by the Public Interest Disclosure Act 1998, provides the legal framework for protecting workers from harm if they blow the whistle. The purpose of a prescribed person is to provide employees with a way of whistleblowing to an independent body that may be able to act on those concerns.

The FRC is a prescribed person under UK whistleblowing legislation. Therefore, individuals working outside the FRC, in the accounting, auditing or actuarial professions, may contact the FRC if they want to make a disclosure about their current or former employer in relation to matters that are within the scope of the FRC's regulatory remit.

During 2023/24 (end of February), the FRC received 64 disclosures in its capacity as a prescribed person. As a result, we took the following action:

47 related to issues not within the remit of the FRC, so whistleblowers were signposted to the relevant bodies where appropriate.
17 were of direct relevance to the FRC's responsibilities and were addressed by the relevant teams.

Complaints about the FRC

During 2023/24 (end of February), nine new complaints were received about the FRC. No significant issues of wider concern were raised and the cases were handled under the FRC Complaints Procedure. Three of the concerns raised were regarding dissatisfaction with the FRC's review of the handling of their complaint by the relevant professional body. Internal reviews determined that the complaints were handled in line with our policies and procedures. One of the complainants exercised their right to have their complaint escalated to the Independent Complaints Reviewer, who rejected the complaint and confirmed that the FRC had acted in line with policy and procedure.

The remaining six complaints were related to varying issues which were reviewed and responded to under the complaints process. Again, no issues of wider concern were raised.

13. Financial Review

As a public body subject to the government's requirements for 'Managing Public Money' we seek to operate efficiently and effectively. We consult with stakeholders annually on our budget and funding requirement.

In March 2023 the FRC set an overall budget of £66.3m for 2023/24. Of this, £56.2m was for the FRC's operating costs, £5.0m for the estimated costs of enforcement cases, and £5.1m for the UK Endorsement Board (UKEB). The budget was set at the level necessary to support our existing regulatory activities, implement planned changes to our supervision approach, and continue the transition to ARGA. At that stage, our planning assumption was that the transition to ARGA would take place in 2024.

We were not given the anticipated additional statutory duties in 2024 and spent less than planned. Overall, although we had intended to draw around £0.8m from our reserves, we made a greater than expected loss of £1.2m as we were unable to raise the required amount of funding on time. On the other hand, our core operating expenditure for the FRC (including UKEB) was £59.6m (£1.7m under budget). For our enforcement related activities, the costs incurred were lower than cost awards received during the year.

Expenditure by business activity

Core cost 2023/24 actual (£m)

A pie chart illustrating the breakdown of core costs for 2023/24. The segments and their values are:

13.6 Regulatory Standards
33.4 Supervision
3.3 Actuarial Standards and Regulation
4.7 Enforcement core
0.0 Accounting case costs
4.6 UKEB

Total: 59.6

Core cost 2022/23 actual (£m)

A pie chart illustrating the breakdown of core costs for 2022/23. The segments and their values are:

11.5 Regulatory Standards
28.4 Supervision
2.8 Actuarial Standards and Regulation
5.1 Enforcement core
-0.4 Accounting case costs
3.7 UKEB

Total: 51.1

Please note, case costs may vary significantly year-on-year depending on the size and number of cases concluded.

Managing our expenditure

A major component of the FRC's operational expenditure of £59.6m was for staff costs, £48.1m. We applied an overall increase to remuneration in line with public sector pay guidance and approval from DBT. This was offset by a deliberate rephasing of recruitment during the year because we were not, as we had expected, taking on additional statutory responsibilities. Overall, staff costs increased by £0.6m (1%) compared to budget.

We have continued to focus on securing best value from our expenditure, including savings on IT and website costs (£0.7m), legal and professional fees (£0.9m), and conferences and travel (£0.4m). We follow a thorough process in evaluating existing supplier performance and engaging new suppliers.

Our annual budget for audit and accountancy enforcement case costs is based on the estimated costs of cases net of amounts recovered through cost awards. In 2023/24, we received a higher than anticipated amount in recoveries, not all of which related to cases concluded during the financial year. Cost awards were paid to the Recognised Supervisory Bodies (RSBs) who funded the relevant investigation. Fine awards under the Audit Enforcement Procedure were paid to DBT; fine awards under the Accountancy Scheme were paid to the sponsoring RSB.

Managing our funding

We operate our annual funding arrangements as agreed with the government and liaise with DBT regularly during the course of the year on progress in collecting the levies.

The FRC receives funding from the audit profession through statutory arrangements and from the accountancy and actuarial professions, accounts preparers, insurance companies and pension schemes through non-statutory arrangements agreed with the government. There is also a small contribution from the government to fund specific projects.

During 2023/24, total revenue from levies was below budgeted amounts by £1.5m due to a number of factors. These included reduced revenue because fewer than expected new companies listed on the London Stock Exchange, and because some payments for levies due in 2023/24 were received in 2024/25. This was a major cause of the higher than expected loss: £1.2m rather than the forecast £0.8m.

Our work on actuarial regulation is funded by the Institute and Faculty of Actuaries (IFoA), insurers and pension schemes. For 2023/24, we set an annual funding requirement of £3.6m, of which we received £3.5m.

FRC funding sources

The following diagram shows how funding from various stakeholders funds the activities of the FRC.

Funding by group

2023/2024 total £58.4m

Four pie charts illustrating funding sources for 2023/2024, showing:

52% - £30.0m Accountancy bodies & audit firms
36% - £21.2m Preparers
6% - £3.5m Actuarial funding groups
6% - £3.7m Other

2022/2023 total £50.9m

Four pie charts illustrating funding sources for 2022/2023, showing:

49% - £25.0m Accountancy bodies & audit firms
40% - £20.5m Preparers
6% - £2.8m Actuarial funding groups
5% - £2.6m Other

Reserves

The FRC currently holds £14.8m of non-refundable reserves which, as set out in previous Annual Reports, were established to cover enforcement case costs that are not recovered from audit professional bodies, unforeseen costs arising from our regulatory activities, and the impact of any shortfall in our revenue, particularly from the voluntary elements of our funding.

As a public body, we work with DBT to ensure that any use of reserves is in line with HM Treasury and Cabinet Office requirements.

Functional standards

We pay particular attention to ensuring that we meet the mandatory Government Functional Standards for Finance and Counter Fraud. We also meet the applicable mandatory standards for other applicable standards, including HR and IT.

14. Risk management

Risk management and controls

Our risk management framework is aligned to HM Treasury's Orange Book and wider best practice principles which helps to deliver our strategy and serve the public interest.

We manage our risks in line with the risk appetite statement set by the Board and integrate risk-based decision making into our business strategy, three-year plan, and annual budget, which ensures our regulatory priorities and business activities are appropriately balanced.

The Board, supported by the Audit & Risk Committee, monitors the risk management and internal control system and has reviewed its effectiveness this year. The committee agreed that the risk management framework is running effectively, with FRC continuing to strengthen its control environment built around good governance and effective risk management.

Risk Management

The FRC's risk management and governance structure applies the 'three lines' model, ensuring that there is effective management and oversight of our risk culture, emerging and key risks, and active cascading of information to support better decision making. The grey arrows in the diagram represent the continuous reporting lines that underpin the effectiveness of our risk management approach.

A diagram illustrating the FRC's three lines of defence risk management and governance structure.

Third line – Government Internal Audit Agency * Provides independent and objective assurance and advice on the effectiveness of the framework of governance, risk management and controls.

First line * Timely identification, assessment and management of existing and emerging risks to achieve strategic objectives. * Implement corrective actions.

ExCo * Sets the tone from the top. * Establishes a positive risk culture. * Conduces deep dives into principal risks. * Cascades risk and controls information.

Audit & Risk Committee * Supports and advises the Accounting Officer and the Board in oversight of risk management and internal control systems. * Reviews effectiveness of risk management and controls.

Board * Determines our overall risk strategy, management and culture. * Determines the nature and extent of the significant risks to be taken to achieve our strategic objectives (risk appetite).

Second line – Corporate Risk Team * Timely and accurate reporting and escalating of risk and control information. * Developing standards, policies and procedures in line with good practice. * Providing expertise, support, monitoring and challenge. * Providing assurance on risk management activity.

Key * Reporting

Maintaining an effective risk framework

Our annual risk effectiveness review, agreed by ExCo and Audit & Risk Committee, demonstrates that our framework is working effectively, with substantial improvements including:

Most independent audits receiving positive ratings.
New risk software and greater focused risk discussions has enabled a significant reduction of risks (53%) at principal and divisional levels, and more efficient and effective management of risk.
50% of three-year strategic risk plan is green, with 'People', 'Processes' and 'Integration' reaching our target, with the remaining 50% well on their way.
Delivered assurance testing of corporate policies and standard operating procedures, enabling greater operational efficiencies and continuous improvement.
Conducted risk deep dives enabling better accountability and alignment of risk with our organisational appetite.

Our corporate risk team and risk & control champions facilitate management of our framework and ensure staff are equipped with the advice, tools and support they need to manage risks within appetite and in a way that is consistent with our purpose and values.

Our focus for 2024/25

Through the coming year we will:

Complete our three-year risk improvement plan and achieve our risk maturity target, ensuring that there is a consistent tone from the top promoting effective risk culture, information flows and assuring key controls to enable consistent delivery of outcomes in the public interest.
Create a proportionate control model to strengthen risk management and internal controls systems and develop an assurance programme focused on the FRC's key controls and support value for money.
Continue rollout of our risk and assurance management tool to enhance risk reporting capabilities, provide greater transparency on the management of risk, including risk interdependencies.

Our principal risk profile

We had previously identified the impact of delay or ineffective regulatory reform due to political and other pressures as one of our principal risks. This risk has now materialised and as a result we will no longer report on it. We refreshed our six principal risks to reflect our current remit, the level of uncertainty, and the changing landscape. This has resulted in us redefining the risks around corporate reporting and audit quality, and failure to drive outcomes, combining cyber and information management, and de-escalating sustainability from the risks reported in the 2022/23 Annual Report and Accounts.

Our principal risks are set out below, mapped against the FRC's objectives:

Objective Icon	Principal Objective
![Graph icon]	Set high standards in corporate governance and stewardship, corporate reporting, auditing and actuarial work and assess the effectiveness of the application of those standards, enforcing them proportionately where it is in the public interest.
![Lightbulb icon]	Promote improvements and innovation in the areas for which we are responsible, exploring good practice with a wide range of stakeholders.
![Globe icon]	Influence international standards and share best practice through membership of a range of global and regional bodies, and incorporate appropriate standards into the UK regulatory framework.
![Lock icon]	Create a more resilient audit market through greater competition and choice.
![People icon]	Develop our organisation as a respected, independent, and high performing regulator; trusted to deliver best-in-class public interest outcomes.

Risk appetite definitions:

Status Icon	Definition
![Tick icon]	Within appetite The right people and processes are in place to manage the risk.
![Yellow circle icon]	Tolerated The risk is being tolerated and subject to active monitoring.
![Orange circle with question mark icon]	Under review The risk is currently under review.
![Red cross icon]	Outside appetite Risk is of immediate concern and subject to continuous oversight.

Objectives	Principal risk	Position against appetite
![Lightbulb icon] ![Globe icon]	Due to a lack of proactivity, responsiveness, or consideration of stakeholder impacts (cause), the FRC fails to manage evolving political and stakeholder expectations (event). This results in a loss of trust in corporate governance, standard setting, corporate reporting, and audit quality and/or undermines our ability to contribute towards our growth duty (effect).	Within appetite ![Green tick icon]
	Key mitigations	Trend
	* Continued engagement and collaboration with key stakeholders (across politics, business, and media), as well as international standard setters and regulatory bodies, to inform our work, support our narrative and ensure that we balance our role as a regulator protecting the public interest while minimising unnecessary burden that supports the UK market to grow.	Improving. We have demonstrated through our work on the UK Corporate Governance Code that we are responsive to stakeholder expectations and have taken a proportionate approach to deliver on the FRC's objectives. Additionally, the prioritisation exercise that each division has recently undergone, in combination with ExCo agreed organisational narrative themes, represents a developing approach that will support our progress against this risk. We expect our upcoming review of the UK Stewardship Code will provide further example of our refreshed and improving approach.
	* Utilising FRC speakers to deliver consistent messaging that targets specific stakeholder audiences to ensure stakeholder expectations are aligned with FRC priorities and objectives.
	* Considering the impacts and benefits through the development of codes and standards to ensure minimal burden on business, while delivering on our public interest duty.

Objectives	Principal risk	Position against appetite
![Graph icon] ![Lightbulb icon] ![Lock icon]	For Local Audit, the FRC is seen to be responsible for issues outside its control due to ineffective coordination of its role and delivery of the Memorandum of Understanding (MoU). This leads to a lack of trust and confidence in our ability to drive a coherent system response.	Within appetite ![Green tick icon]
	Key mitigations	Trend
	* Effectively coordinating the system's response to current and longer-term challenges through chairing the Local Audit Liaison Committee and FRC's local audit programme to support system partners to implement measures to address delays and hold all system partners (including FRC in its regulatory functions) to account.	Stable. The FRC chairs the external Local Audit Liaison Committee effectively. The new internal Local Audit Programme Board provides stronger governance around the programme. In delivering the MoU, substantive progress has been made to develop the local audit workforce strategy and to implement an escalated reporting framework for local bodies and auditors. Proactive engagement with target stakeholders has continued, particularly coordinating stakeholder response to measures to address delays, both in terms of policy formulation and ensuring system-wide communication and engagement activity.
	* Leading delivery of outcomes against the areas of responsibility outlined in the MoU between DLUHC and the FRC, including addressing workforce challenges.
	* Proactive stakeholder engagement across the local audit system, government, and Parliament to support a clear understanding of the roles and responsibilities of the FRC in local audit, alongside reporting on progress with addressing current challenges.

Objectives	Principal risk	Position against appetite
![Graph icon] ![Lightbulb icon] ![Lock icon]	Due to insufficient investment, focus or introducing unjustified divergence (cause), the FRC fails to effectively influence and implement domestic and international Accounting, Audit and Actuarial standards and expectations (event). This results in unnecessary cost to participants in the ecosystem and risks undermining the quality of information supporting decision making in financial markets (effect).	Within appetite ![Green tick icon]
	Key mitigations	Trend
	* Monitoring: Understanding market and regulatory requirements through periodic horizon-scanning and engagement and input from other FRC divisions to ensure it meets divisional objectives/strategy.	This is a consolidation of previously identified risks to the FRC. We continue to focus our international influencing to help ensure that international standards meet the needs of UK stakeholders and are risk-based, proportionate and effective. We use extensive stakeholder engagement alongside regular horizon scanning to inform and prioritise our work. We also regularly review the effectiveness of our codes, standards and guidance to ensure that they underpin trust and confidence in information for decision making and its assurance to support economic growth and UK financial markets.
	* Development of timely codes, standards and guidance to meet stakeholder expectations.
	* Attendance of meetings with local and international bodies and stakeholders, participation in activities of these entities and bodies and representation on boards and committees. Invitations to speak at events and conferences.

Objectives	Principal risk	Position against appetite
![Graph icon] ![Lightbulb icon] ![Lock icon]	Our supervisory model is not sufficiently effective, risk-based, or proportionate (cause), creating a failure to drive audit quality improvements or build firm(s) capability and market resilience (event), resulting in a lack of confidence in audit and a less sustainable and healthy audit market (effect).	Within appetite ![Green tick icon]
	Key mitigations	Trend
	* The FRC's approach to supervision of audit firms and professional bodies (PBs) is proportionate. Larger/systemic firms and all PBs have a named Supervisor. Registration of PIE audit firms and auditors is carried out in an effective and proportionate way, considering the Public Interest test. We monitor the quality of PIE audit through a risk-based selection of audit inspections (as do the PBs for non-PIE audit). The approach to firm-wide inspections under International Standard on Quality Management (ISQM)1 is proportionate to risk. We monitor the compliance of delegation agreements related to non-PIEs between the FRC and PBs to ensure their approach is also risk based and effective.	Improving. Audit quality results derived through direct supervision of the firms and via the PBs continue to show that it is improving at the major firms. We have seen a trend of improving audit quality year-on-year spanning four years, with a 10% increase compared to the 67% recorded in 2020 and we expect this to remain stable. The larger audit firms continue to be operationally and financially resilient. Quality at some smaller firms remains inconsistent and will take longer (some years) to show signs of improvement. Some smaller firms have stepped out of the PIE market.
	* We supervise larger firms' operational and financial resilience, governance, ethical behaviour. We evaluate larger audit firms' recovery plans and this year we completed a routine internal market resilience exercise with an external exercise planned for the new financial year.
	* The FRC's competition policy seeks to identify any suitable non-legislative actions and activities that could be implemented to improve choice of audit firm. For example, launching the Scalebox to further support smaller firms as they grow or enter the PIE audit market.

Objectives	Principal risk	Position against appetite
![People icon]	As a result of poor or inconsistent internal management and leadership or structures and systems (cause), the FRC fails to adapt to change (event) and deliver on its strategic objectives (effect).	Under review ![Orange circle with question mark icon]
	Key mitigations	Trend
	* Ensure Executive Committee and senior leaders have clear leadership objectives including values/behaviours to enable a coherent and consistent tone from the top.	This is a new risk to the FRC. We have introduced SLT expectations to grow our leadership capabilities, which will be an essential component for achieving our objective of being a best-in-class regulator.
	* Quarterly Executive Committee + Senior Leadership Team (SLT) meetings to discuss and engage leaders in organisational development and encourage efficient and effective governance.
	* Use the people survey and other engagement channels to identify hot spots and where further intervention is required.
	* Executive Committee periodically discusses SLT succession planning and talent management to drive consistency in core people management.

Objectives	Principal risk	Position against appetite
![People icon]	Due to cyber-attacks or an insufficiently mature approach to data and information management (cause), we fail to maintain our data or exploit opportunities for better regulatory outcomes (event). This results in loss of sensitive data, breach of law/regulation, fines and reduced regulatory effectiveness (effect).	Tolerated ![Yellow circle icon]
	Key mitigations	Trend
	* Cyber essentials and disaster recovery testing in protecting our information security, understanding strengths and weaknesses to defend against cyber threats.	Stable. We continue to review cyber essentials plus certification and have a rolling programme of security enhancements, patching and monitoring. We have enhanced our business continuity procedures with a facilitated cyber scenario test including external partners and we are implementing lessons learnt. We maintain compliance with applicable data protection rules and report to the Board on GDPR, migration of SharePoint and have a holistic information glossary in place.
	* IT monitoring and reporting and patching programme implementation of measures designed to eliminate, reduce, or offset the undesirable action on our IT environment.
	* Microsoft SharePoint configuration and migration providing a centrally secure place to store, organise, share, and access our information, which is supported by information governance and general data protection regulation (GDPR) privacy policies.

Governance

15. Chair's introduction

I present this year's governance section of our annual report, which sets out how the Board and its committees operated during 2023/24. This has been a significant year for the Board, as we have welcomed a new Chief Executive, undertaken a review of our governance structure and commissioned an external Board performance review.

We saw a number of important changes on the Board during the year, notably the retirement of our Chief Executive, Sir Jon Thompson, after four years in the role. He has made a significant contribution to the organisation during his tenure for which he deserves our sincere thanks. Following an extensive external search campaign, Richard Moriarty joined us as new Chief Executive in October

Richard is an experienced regulator who has brought a fresh perspective to the Board, and I have enjoyed working closely with him in recent months, as we help the Board to define the priorities for the organisation for the years ahead.

In addition, we saw two retirements from among our non-executive directors. John Coomber stepped down after nine years, during which time he had served in a number of roles, most recently as Chair of the Supervision Committee and Senior Independent Director. Sir Ashley Fox also left his role to pursue other opportunities. I would like to thank both John and Ashley for their contributions to our work.

To fill the vacancies arising from these retirements and to support longer term succession planning, we launched a recruitment campaign through the public appointments process.

The timing of the General Election led to a pause in this process, but we nevertheless hope to be able to announce the appointment of additional non-executive directors in due course. We undertook a review of our internal governance structure, which resulted in the Regulatory Standards and Codes Committee and Supervision Committee being dissolved, with their responsibilities taken on by the Board and the Executive Committee. These changes are effective from the 1 June

Further information on the process and rationale for these changes is provided on page 71.

It is right that the FRC Board focuses on the strategic direction of the organisation to ensure that the UK's leading reputation for trustworthy reporting is maintained. We continue to engage with our stakeholders to convey our direction and approach to meeting this purpose.

Sir Jan du Plessis Chair Headshot of an older man with glasses, wearing a suit and yellow tie, smiling.

"We saw important changes on the Board"

"a review of our internal governance structure"

We also commissioned an external Board Performance review which found the FRC's governance to be effective. Further details on actions that will be taken forward in light of the review can be found on page 71.

Finally, I would like to thank the people of the FRC for their commitment, professionalism and focus on delivering on our priorities over the year.

Sir Jan du Plessis FRC Chair A handwritten signature.

16. Governance and Transparency Framework

The FRC is an Arm's-length body of the government and a private company limited by guarantee. It reports to the Secretary of State for Business and Trade, and to Parliament on the discharge of its functions. The Secretary of State for Business and Trade appoints the Chair, CEO and Non-Executive Directors (NEDs) to the FRC Board, which is responsible for our strategy and monitoring its implementation. Our governance structure is designed to provide the Board with the assurance and confidence that any proposals considered by them take account of the impact on our stakeholder community. The following diagram shows the governance structure in place up to 31 May

From 1 June 2024, the new FRC governance structure was implemented. Further details can be found on page 71.

FRC Board

Executive Committee
Role: manages day-to-day operations, resources, policies and programmes
People Committee
Role: remuneration, succession planning and talent management
Audit & Risk Committee
Role: oversight of financial reporting, internal audit and risk control functions

Other Committees

Conduct Committee
Role: enquiries, investigations and enforcement functions
Supervision Committee
Role: supervisory and monitoring functions
Regulatory Standards and Codes Committee
Role: regulatory standards and codes functions

Independent Panels

Tribunal Panel (Arm's-length)
Enforcement Committee Panel (Arm's-length)

Advisory Bodies

Senior Advisers
Non-Executive Advisory Panel
A pool of subject specialists to be called on by the Executive/Committees

Corporate governance statement

As a private company, limited by guarantee, the UK Corporate Governance Code does not apply to the FRC. However, the FRC is committed to upholding high standards of transparency, accountability, and integrity, and as the regulator responsible for the Code, it aligns with the principles and provisions of the Code where they are relevant and applicable. As an Arm's-length body, the FRC also follows the Regulators' Code.

Areas of departure from the Corporate Governance Code are explained below.

Engagement with shareholders and stakeholders (Provisions 3 and 4)

As the FRC is a private company limited by guarantee, it has no shareholders, but we regularly engage with our stakeholders through a variety of communications and engagement. Further information can be found on page 31 in relation to our s.172 statement.

Appointments to the Board (Provisions 17 and 18)

Since the appointments to the Board are a matter for the Secretary of State, the Board appointments procedure is not directly under the FRC's control.

However, the Chair of the Board develops the candidate brief to support the recruitment campaign and sits on the public appointments recruitment panel to ensure that the skills and experience required on the Board are taken into consideration.

The People Committee also annually considers the balance of competencies to ensure alignment to the FRC's purpose and strategic priorities; the environment in which it operates; the characteristics, perspectives, independence, and diversity of Board members; and other factors relevant to its effectiveness. This review informs any recommendations to the Secretary of State in respect of reappointments and the appointments exercise.

The FRC does not have shareholders, therefore members of the Board are not subject to annual shareholder re-election. The terms of appointment are set by the Secretary of State in accordance with the Public Appointments Process.

Audit, risk and internal control (Provision 31)

Whilst the Code requires the production of a viability statement. As an Arm's-length body under the sponsorship of DBT, the FRC is not required to produce a viability statement assessing the FRC's prospects over the longer-term. However, the FRC receives a Letter of Comfort from DBT which provides an assurance of financial support.

Furthermore, the financial statements confirm that it is appropriate to adopt the going concern basis of accounting and the Plan and Budget approved by the Board supports this view.

Remuneration (Provisions 32, 33, 36-38)

The FRC does not have a Remuneration Committee or shareholders.

The People Committee has responsibility to consider submissions in respect of staff pay awards and to advise the Secretary of State on the proposed fees for Non-Executive Directors.

As a Central Government Body, the FRC follows public sector pay guidelines and there is oversight from DBT, HM Treasury and the Cabinet Office in relation to remuneration decisions across the organisation. Therefore malus and clawback provisions are not relevant.

17. Our Executive Committee

The Executive Committee meets weekly to discuss operational, strategic, financial, reputational and workforce matters and is chaired by our CEO. The Executive Committee leads the day-to-day running of the organisation and works to achieve the objectives established by the Board.

The Executive Committee is also responsible for managing the operations of the FRC in accordance with the Framework Agreement agreed with DBT.

Key areas of focus for the committee

Strategy: including the development of the Strategy, Plan and Budget, and office location plans. The committee also monitored progress against agreed objectives.
Operational: including reports from the Finance Director on management accounts, procurement, IT (including cyber security) and office management matters.
Risks and internal controls: in addition to routine risk reports, the committee engaged in deep dives into the FRC's principal risks and considered the effectiveness of the FRC's internal control and risk management framework.
People: including key people-related policies, FRC culture, staff survey results and hybrid working arrangements.
Stakeholder engagement: including review of the stakeholder perceptions survey, approval of a new communications planner to enable us to better target information to our stakeholders, and consideration of feedback on key stakeholder matters and responses to FRC publications. This informs our future policy work and offers insight into possible future issues and areas of work. The committee also focused time on internal communications and messaging.
Policy: including both internal and external policy positions.

Executive Committee members (as of 31 March 2024)

Headshot of a bald man with glasses, wearing a light blue shirt and dark blazer. Richard Moriarty Chief Executive Officer, Statutory Director and Accounting Officer

Role Richard leads the Executive team and is responsible for the implementation of the FRC strategy. As Accounting Officer, he ensures that the FRC is run in accordance with the Framework Agreement agreed with DBT, the requirements of the Managing Public Money principles, and any additional instructions and guidance issued from time to time by DBT, HM Treasury and the Cabinet Office, while maintaining the FRC's position as an independent regulator.

Experience He has over 25 years of board level experience across a range of regulated sectors. Prior to joining the FRC, he was CEO of the UK's Civil Aviation Authority and before that the CEO of the Legal Services Board, which oversees the regulation of the legal professions. Earlier in his career he held senior roles in the regulation of social housing, communications and energy. He has also held roles in the private sector such as being a director with a water company and as a partner for a consultancy. In a non-executive capacity, he chairs the Board for Paradigm Housing Association.

Headshot of a man with glasses and dark hair wearing a suit and blue tie. Mark Babington Executive Director, Regulatory Standards

Role Mark leads the FRC's Regulatory Standards division covering audit, corporate reporting, corporate governance and stewardship, actuarial policy and the FRC Lab. Prior to joining the Executive Committee, Mark led the FRC's UK Audit Policy Programme and work to support the reform of international standard setting for auditors by global regulatory authorities. He is a member of the International Ethics Standards Boards for Accountants and chairs the Board's Sustainability Task Force, and represents the UK on the Sustainability Standards Advisory Forum of the ISSB.

Experience Before joining the FRC, Mark was a Director at the UK National Audit Office, leading the audits of a number of major government departments. For five years, Mark was a member of the UK government's counter-fraud taskforce. He is a former Chair of the International Colleges of Auditors of several European defence-related organisations. Mark is an Independent Governor, Board member and Chair of the Audit and Risk Committee of the Westminster Foundation for Democracy, the UK public body dedicated to supporting democracy around the world.

Headshot of an older woman with blonde hair wearing a dark suit jacket and pearl earrings. Elizabeth Barrett Executive Counsel and Executive Director of Enforcement

Role Elizabeth leads the FRC's Enforcement division and is responsible for decisions in relation to enforcement proceedings involving auditors, accountants and actuaries. She chairs the Enforcement Section of the International Forum of Independent Audit Regulators.

Experience Elizabeth spent 30 years at Slaughter and May, including 27 years as a partner, and was head of the firm's Dispute Resolution department between 2004 and 2008.

Her practice spanned a broad range of complex litigation and contentious regulatory matters in the commercial and financial sectors covering both private and public law.

Headshot of a woman with blonde hair and red lipstick wearing a dark top. Miranda Craig Director of Strategy and Change

Role Miranda joined the FRC in March 2020 as Director of Strategy and Change, initially with responsibility for delivering the transformation programme, and now the FRC's wider change agenda including as Senior Responsible Officer (SRO) for its locations programme.

Experience Miranda is a Fellow of the Chartered Governance Institute with 17 years' experience across professional services, large private and listed companies, having qualified while at Ernst & Young. She has also held senior secretariat roles at Sage Group plc, ARM, R&Q and EDF Energy.

Elizabeth Barrett Executive Counsel and Executive Director of Enforcement

Experience Elizabeth spent 30 years at Slaughter and May, including 27 years as a partner, and was head of the firm's Dispute Resolution department between 2004 and 2008.

Her practice spanned a broad range of complex litigation and contentious regulatory matters in the commercial and financial sectors covering both private and public law.

Headshot of a man with short grey hair wearing a suit and patterned tie.

Alex Kuczynski General Counsel and Executive Director of Corporate Services

Alex Kuczynski gave notice to leave the FRC on the 18 March 2024 and as per his six month contractual notice period, will leave the FRC in September. We wish him well for the future and recruitment is underway for his replacement.

Role Alex is responsible for the Corporate Services division which comprises the General Counsel team, Finance (including risk, procurement and facilities), Human Resources, Information Technology, and Economics, Strategy and Analytics. The role brings together the professional and support services for the FRC.

Experience Prior to joining the FRC, Alex was Chief Corporate Affairs Officer and an Executive Board Director at the Financial Services Compensation Scheme (FSCS). As a lawyer, Alex began his career with the FSCS as Head of Legal, but during his 20 years with the organisation held various roles and worked on a wide range of financial services issues, particularly those concerned with actual or potential consumer detriment across investment business, insurance and banking, and often collaborating closely with government, regulators and industry stakeholders.

Headshot of a woman with auburn hair and red lipstick wearing a blue blazer.

Kate O'Neill Director of Stakeholder Engagement and Corporate Affairs

Role Kate leads the Stakeholder Engagement and Corporate Affairs function with responsibility for delivering a coordinated international engagement programme for all stakeholders across the whole of the FRC's remit. She is also responsible for marketing and reputation, employee and change communications, media relations, digital communications and public affairs.

Experience Previously, Kate was Head of Corporate Development at Jupiter Asset Management, where she was responsible for corporate strategy, investor relations and communications. She was the Managing Director of Investor Relations at Lloyds Banking Group during the financial crisis, before becoming a Partner at Brunswick and then at Maitland advising global clients on capital markets and communications issues. After qualifying as a lawyer, Kate spent most of her career in the financial services sector in the UK, Europe and Australasia, holding senior leadership roles in distribution and alternative assets at AMP Asset Management, Henderson Global Investors and RBS Asset Management.

Headshot of a woman with brown hair and a bright smile wearing a green top.

Sarah Rapson Executive Director of Supervision

Role Sarah is responsible for leading the FRC's Supervision division and its work to enhance audit quality both through standard setting and audit monitoring of firms, supervisor oversight of the Recognised Professional Bodies, and promoting improvement in corporate reporting through detailed technical reviews of companies' Annual Reports and Accounts. Sarah also took on the role of Acting CEO, following Sir Jon Thompson's resignation and prior to the appointment of Richard Moriarty.

Experience From 2016 to 2021, Sarah was the Director of Authorisations at the FCA. From 2013 to 2016, she was a member of the Home Office Board as the first Director General of UK Visas and Immigration, responsible for overseas visas, in-country immigration and asylum. Sarah was also Chief Executive of the Identity and Passport Service (now HM Passport Office) from 2010 to 2016, and in 2010 was also appointed by Her Majesty the Queen as the 20th Registrar General for England and Wales responsible for Civil Registration, a post she held until 2014.

She is currently the Senior Independent Director of North Middlesex University Hospital Trust and, from December 2021, is also a NED of the Royal Free London NHS Foundation Trust.

18. Our Board Members

Group photo of eight professionals, likely a board or leadership team, in business attire.

The Board is responsible for the strategic direction and supervision of the FRC, regularly reviewing operational plans and financial performance. It is also responsible for managing, assessing and mitigating risk. The Board is comprised of the Chair, Chief Executive and five non-executive directors. The Board has delegated functions under the enforcement and disciplinary procedures to the Conduct Committee. The Board met eight times in 2023/24.

The roles of the Chair and the Chief Executive are held separately, ensuring a clear separation of responsibilities in line with the UK Corporate Governance Code. The Chair leads the Board and ensures its effectiveness through the management of Board meetings, agenda setting and supporting the optimisation of Board discussions. The Chair also takes a leading role in Board succession planning and ensuring effective communication with stakeholders.

As the Accounting Officer, the Chief Executive is personally responsible for safeguarding the public funds under their control, for ensuring propriety and value for money in the handling of those public funds, and for the day-to-day operation and management of the FRC. The Chief Executive has a responsibility to the Permanent Secretary for Business and Trade as the Principal Accounting Officer for all public bodies in the DBT family, who delegates powers directly to the Chief Executive through a Framework Agreement.

In the financial year 2023/2024, the Board discharged its responsibilities through Reserved Powers, and through its Board Committees. The Committees are composed of non-executive directors and are assisted by Senior Advisers who are subject matter experts and act as a sounding board for ongoing issues and topics. Observers from the FCA and DBT routinely attend the Regulatory Standards and Codes Committee. Representatives from the NAO and the Government Internal Audit Agency (GIAA) attend meetings of the Audit & Risk Committee.

The biographies for all members of the governance structure, the Reserved Powers of the Board and the Terms of Reference for each committee, together with a summary of Board business, is published on the FRC website.

Board members (as of 31 March 2024)

Key to Committees

AR: Audit and Risk P: People C: Conduct RSC: Regulatory Standards and Codes S: Supervision

Bold and black keyline denotes Chair of the Committee

Full biographical details of each Director are available at www.frc.org.uk

Headshot of an older man with glasses, smiling, in a suit and yellow tie.

Sir Jan du Plessis Chair (Member of P, C, RSC)

Appointed 3 February 2022 Attendance: 8/8

Experience Sir Jan has served as Chair of various public companies over the last 18 years: including BT Group plc, Rio Tinto plc, SABMiller plc, RHM plc and British American Tobacco plc. These roles have given him extensive experience in leadership and governance of major public companies. He has also had multiple interactions with the institutional investment community and gained meaningful insight into the challenges facing the audit services sector.

Sir Jan has also served as NED of Marks and Spencer Group plc and Lloyds Banking Group plc. From 1988 to 2004, he was CFO of Richemont.

Sir Jan was knighted in the 2022 New Year's Honours List for services to telecommunications and business.

External appointments Sir Jan is Mentor and Adviser of Chair Mentors International.

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Richard Moriarty Chief Executive Officer and Accounting Officer

Appointed 2 October 2023 Attendance: 4/4

Experience Richard brings experience of working across a range of regulated sectors. Prior to joining the FRC, he was CEO of the UK's Civil Aviation Authority and before that the CEO of the Legal Services Board, which oversees the regulation of the legal professions. Earlier in his career he held senior roles in the regulation of social housing, communications and energy. He has also held roles in the private sector such as being a director with a water company and as a partner for a consultancy.

Richard chairs the Executive Committee.

External appointments In a non-executive capacity, Richard Chairs the Board of Paradigm Housing Association.

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Clare Thompson Senior Independent Non-Executive Director (Member of AR, P, RSC)

Appointed 1 February 2022 Attendance: 8/8

Experience Clare is an experienced Non-Executive Director with a deep understanding of the insurance sector and extensive financial services and audit experience. She spent 23 years as lead audit partner on major financial service groups at PwC and served as UK Insurance Leader.

Her previous Non-Executive Director roles include Direct Line Group plc, Miller Insurance Services LLP, and the British United Provident Association Limited (Bupa).

Clare is a Fellow of the Institute of Chartered Accountants in England and Wales.

External Appointments She is a Senior Independent Director and Chair of the Audit Committee at M&G plc.

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Angela Cha Independent Non-Executive Director (Member of P, S, C, AR)

Appointed 1 February 2022 Attendance: 8/8

Experience Angela is a solicitor and a former partner at the international law firm, Pinsent Masons, where she was joint head of the financial services sector group and head of the outsourcing, commercial and technology practice in London. She specialised in advising financial services sector clients on major change and business transformation projects. After her private practice career with Pinsent Masons, Angela continued her legal career, working with financial services sector clients on a consulting basis.

External appointments Angela is a co-opted member of the Finance, Audit & Risk Committee at the NSPCC.

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Hannah Nixon Independent Non-Executive Director (Member of P, RSC, S, AR)

Appointed 24 June 2021 Attendance: 8/8

Experience Hannah has widespread experience in economic regulation across a range of industries. She brings significant experience of developing, implementing and enforcing regulatory regimes and influencing public policy. She was the first CEO of the Payment Systems Regulator, the economic regulator of the UK's £80tn payments industry, responsible for driving competition and innovation in the interests of consumers. She was also a senior partner at Ofgem, where she had responsibility for the networks division.

External appointments Hannah is currently Chair of the Single Source Regulations Office, the UK regulator for non-competitive defence procurement, and is also a NED of National Grid Electricity Systems Operator, Thames Water and Worldpay.

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Ruwan Weerasekera Independent Non-Executive Director (Member of P, S, AR)

Appointed 21 June 2021 Attendance: 8/8

Experience Ruwan is the former COO and a Managing Partner of SoftBank Investment Advisers, a Managing Director and COO for Securities at UBS Investment Bank and Partner of Accenture. He is also a former Senior Independent Director of ICBC Standard Bank PLC and a Non-Executive Director of London North West University Health Care Trust.

External appointments Ruwan is a NED of UK Research and Innovation and Chair of its Audit and Risk Committee.

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David Willis Independent Non-Executive Director (Member of C, P)

Appointed 1 February 2022 Attendance: 8/8

Experience David is a solicitor by profession and was a partner in international law firm, Herbert Smith Freehills (and predecessor firm Herbert Smith) for many years. He was Managing Partner of Herbert Smith from 2008 to 2012 and Joint CEO of Herbert Smith Freehills from 2012 to

He was previously a member of the governing body of Queen Mary University of London, where he chaired the Audit & Risk Committee, and a member of the board of the Solicitors Regulation Authority, where he chaired the Finance and Audit Committee and was a member of the Law Society Group Audit Committee.

External appointments David is currently Chair of Paradigm Trust, a multi-academy trust, and Vice Chair of United Response, a charity supporting adults with learning disabilities, where he chairs the Finance and Resources Committee. He is also a NED and member of Primrose Street Ltd.

Company Secretary

The Board and its committees have access to an appropriately qualified and experienced Company Secretary who provides independent advice on governance matters. They are responsible for working with the Chair and the Chief Executive to develop the agendas for Board and committee meetings and ensuring that all governance procedures are complied with. The removal and appointment of the Company Secretary is a matter reserved for the Board.

Transparency

The FRC reports to the Secretary of State for Business and Trade and Parliament on the discharge of its statutory functions and lays its Annual Report and Accounts before Parliament.

Board appointments, diversity and succession planning

Appointments to the Board are made by the Secretary of State for the Department for Business and Trade in accordance with the Public Appointments Process. The Chief Executive is a permanent employee and members of the Board are subject to three year appointments, except the Chair, who is appointed for a four year term.

The Board Diversity Policy sets out the Board's support for the government's ambitions with respect to diversity and the Board's commitment to work with the Secretary of State in pursuit of the government's diversity objectives. The Board gender split is 58% male and 42% female and is compliant with the Parker Review.

The Board annually reviews the Board skills matrix and succession plans and in the year under review commissioned the recruitment of up to four new NEDs through the public appointments process to ensure the Board has relevant expertise to support the strategy.

Board induction and training

With Richard Moriarty, joining as CEO, a detailed and tailored induction programme was initiated. The programme included meetings with senior executives from across the FRC to gain a full understanding of the roles and responsibilities of the senior management of the FRC, its standard setting, supervision and enforcement procedures and policies, and the overall operations of the FRC. All Board members continued to receive bespoke training on various matters throughout the year.

Independence and conflicts

The FRC attaches special importance to avoiding any potential conflict between the work and values of the FRC and the personal interests of its staff, NEDs and Advisers. Please see more on our ethics and compliance on page 35.

Key Board matters 2023/24

Board meeting agendas are carefully tailored in advance by the Chair, Chief Executive and the Executive team to ensure an appropriate balance between strategic and operational matters. The Board agenda also includes a report from the Chief Executive on key operational matters, and, on a quarterly basis key information on the delivery of the strategy, finances, risks, HR matters and the internal control environment.

The Chairs of the Governance and Regulatory Committees update the Board on the proceedings of their meetings, including key discussion points and matters for approval. Please see the reports on the individual committees for more detail on their areas of focus on pages 73-83.

The Board assesses, constructively challenges, and considers the Executive's proposals and matters for decision to ensure they are aligned with the FRC's strategy and purpose. The focus of the Board's business throughout the year can be assessed through the lens of seven broad themes outlined below. The Board and Executive are assisted by individual Senior Advisers who are subject matter experts. The Senior Advisers provide advice, feedback and mentoring and act as sounding boards for ongoing issues and topics.

Theme	Key areas of focus for the Board in 2023/24
Strategy and Operations	- Received updates from the Executive in respect of the Plan and Budget, key risks, and forward planning priorities. - Approved changes to our governance structure (further details can be found on page 71). - Noted that further statutory powers were not forthcoming in the King's Speech. As a result, the Board will continue to monitor any further developments in this area. - Considered the local audit landscape and key risks to the organisation. - Commissioned two market studies in relation to competition in audit.
Regulatory Standards and Codes	- Received regular updates on the Regulatory Standards and Codes division and Committee activities. - Recommended to the Board approval of various Regulatory Standards and Codes, following scrutiny by the Committee, for publication. - Recommended to the Board approval of an updated UK Corporate Governance Code, following an extensive stakeholder consultation exercise. - Launched a fundamental review into the UK Stewardship Code. - Received updates on the FRC's International Standard Setting activities.
Supervision	- Received regular updates on the FRC's Supervision division and Supervision Committee activities. - Approved the publication of the Tier 1 audit quality and supervisory reports. - Approved the publication of the Independent Supervisor reports of the Auditors General and the Professional Bodies Oversight Report to the Secretary of State. - Considered and monitored the implementation of the FRC's shadow system leader role for local audit.
Enforcement and Conduct	- Received regular updates on the FRC's Enforcement division and Conduct Committee activities, and scrutinised progress against KPIs. - Received updates from the Executive Director of Enforcement on cases under investigation.
Engagement with stakeholders and staff	- Approved the 2024/25 Plan and Budget, following consultation with stakeholders. - Received regular updates from the Stakeholder Engagement and Corporate Affairs team on how the FRC engages with its stakeholders. - Received regular updates from the People Committee and the NED responsible for workforce engagement to support staff wellbeing.
Maintaining good governance	- Approved reform proposals to support the FRC's Governance structure and ensure it continues to remain effective. - Approved the Annual Modern Slavery Statement in accordance with the FRC's commitment to meet section 54 of the Modern Slavery Act 2015. - Received oversight reports on the UKEB and monitored its operations as part of the FRC's oversight role. - Considered the outputs from the External Board Performance Review and agreed an action plan to support the Board's continuous improvement. - Reviewed Board succession plans and in conjunction with DBT, considered candidates for up to four Board appointments.
Finance, risk and operations	- Received regular updates from the Audit & Risk Committee on the internal and external audit plan, internal controls and financial management. - Received regular operational updates from the Chief Executive, as well as monitored the financial health of the organisation through quarterly financial and KPI reports. - Provided input and challenge to the development of the risk management framework, updates to the principal risks, confirming that the risk and control environment is effective. - Approved the Annual Report and Accounts, and scrutinised the disclosures contained therein.

Board Performance Review 2023/2024

The Board Performance review for 2023/24 was facilitated externally by Independent Audit Limited which has no connection to the FRC, and is considered by the Board to be independent. The review included conducting individual interviews and questionnaires with the Directors, members of the Executive Committee, the Company Secretary and observing a Board meeting as well as the three Regulatory Committees and the Audit & Risk Committee.

Conclusions from this year's review

The Board Performance review concluded with a final report and feedback session with the Chair, and a presentation to, and discussion with, the Board at a Board meeting.

The Board considered the conclusions of the report which confirmed that the Board is effective with all parties operating in a positive and collaborative manner.

The Board adopted suggested actions arising from the report, which included improvements around horizon scanning and strategy development, the positioning of Board papers by members of the Executive to support optimised Board discussions and opportunities for the Board to engage further with staff.

The Senior Independent Director and the non-executive directors also met to discuss the performance of the Chair without the Chair being present and subsequently met with the Chair to provide feedback.

Governance Reform

Following the 2018 Kingman report recommendations, the Board agreed a number of changes in 2020 to streamline the FRC's then outdated governance structure. Those changes, among others, abolished an unwieldy structure comprising 14 governance bodies and established the structure which has been in place since, consisting of the two governance committees (the Audit and People committees) and three regulatory committees (the Regulatory Codes and Standards, Supervision and Conduct committees).

Whilst this structure supported the significant modernisation of the FRC over recent years, it also had its shortcomings, and with the greater collective insight acquired by the Board over the last two years and the arrival of a new Chief Executive, the Board took the opportunity during the year to commence a further program of reform of its governance structure.

During Phase 1 of this program, the focus was on the Regulatory Codes and Standards and Supervision committees. Whilst, in principle, there was nothing wrong in the earlier decision by the Board to delegate various important tasks to these committees, the Board concluded that the structure also had certain disadvantages:

Non-Executive directors risked getting too involved in the detail of work programs that were the responsibility of executives, thereby potentially blurring the lines of executive and non-executive accountability and detracting from the ability of non-executive directors to add value at a more strategic level.
Reports to the full Board on the work of those committees, whilst (for example) still needing to submit codes and standards to the full Board for approval, resulted in duplication of effort and an inefficient use of time.
The existence of these committees risked encouraging siloed thinking within the executive ranks, whilst also not helping the non-executive directors to think more holistically about the organisation's challenges.

As a result, the Board decided (with effect from 1 June 2024) to dissolve both the Regulatory Codes and Standards Committee and the Supervision Committee, with their responsibilities either being delegated to the Executive Committee or reserved for the Board.

Further detail on the responsibilities of the Board and Committees can be found in the FRC Governance Handbook.

During Phase 2 of its Governance Reform, the Board will be considering the work of the Conduct Committee and operation of the FRC's enforcement regime more generally. This work has not yet begun, and it is too early to say whether this will lead to further changes in the FRC's governance structure.

The diagram illustrates the structure of the FRC Board and its supporting committees/panels.

FRC Board - Oversees: - Executive Committee: Role: manages day-to-day operations – resources, policies and programmes. - People Committee: Role: remuneration, succession planning and talent management. - Audit & Risk Committee: Role: oversight of financial reporting, internal audit and risk control functions. - Conduct Committee: Role: enquiries, investigations and enforcement functions. - The Conduct Committee is supported by: - Senior Advisers - Non-Executive Advisory Panel: A pool of subject specialists to be called on by the Executive/Committees. - Separately, at arm's-length, are: - Tribunal Panel - Enforcement Committee Panel

19. Conduct Committee Report

I am pleased to present the Conduct Committee report for the year ended 31 March 2024, which provides an overview of the work of the Committee and the key matters it addressed over the year.

The Conduct Committee's work involves careful consideration. It must balance the impact of its decisions on firms and individuals who work in the highly technical, and often challenging, professions of accounting, auditing and actuarial work against the FRC's purpose to protect the public interest, uphold the standards that the markets expect and rely upon, and hold to account the few who fall below those standards. Of note is the recently announced investigation of a member of a professional accounting body in relation to compliance with governance, reporting, regulations and professional standards relating to Thurrock Council's operations and investment activities for the financial years ended 31 March 2018 to 31 March

This is the first time the FRC has opened an investigation into the conduct of a member who was an employee of a Local Authority.

In total we opened six investigations in the year, which is fewer than in previous years. This reduction in investigations is likely to be due to many factors including external events, the improvement in overall audit quality in recent years (and ongoing measures through supervisory tools to work with Tier 2 and Tier 3 firms) and the FRC's increased focus on ensuring that it is proportionate in its use of resources. In respect of the latter this means that Constructive Engagement rather than an investigation will continue to be developed as an appropriate response.

For the third consecutive year, the Enforcement Division concluded more investigations than have been opened, reducing in the number of ongoing investigations. This included the resolution of the Carillion audit investigations⁹ with significant sanctions imposed. There are 34 investigations open at 31 March 2024 compared to 38 in 31 March 2023.

Finally, we also said farewell to Sir Ashley Fox, who resigned from the Committee. Following his resignation, the Committee welcomed Sir Jan du Plessis, as a member.

David Willis Chair of the Conduct Committee

Role of the committee

The Conduct Committee is responsible for oversight of the FRC's enquiries, investigations and enforcement function, ensuring that appropriate cases are investigated and conducted fairly, in the public interest, in a timely and cost-effective manner and in accordance with due process, publicised in accordance with our duties to third parties, and the Regulators' Code. The Conduct Committee also looks at some wider legal matters at the FRC, such as the FRC's handling of complaints and the approval of the AER.

Membership and attendance

Members	Attendance
David Willis (Chair)	9/9
Angela Cha (Deputy Chair)	9/9
Sir Jan du Plessis¹⁰ (appointed on 11/09/23)	5/5
Sir Ashley Fox (resigned on 11/09/23)	3/4
Senior Advisers
Richard Murray	9/9
Anne Whitaker	7/9
Sean Collins (Retired 31/03/24)	6/9
David Snell (appointed on 01/01/24)	2/2

Key areas of focus

The core function is to decide whether or not to open investigations. The committee also provided non-executive oversight and challenge to the Executive on conduct and enforcement matters including:

Overseeing the work of the Case Assessment Team (formerly known as the Case Examinations and Enquiries Team), including receipt of regular updates on the nature and number of cases being opened and closed by the Case Examiner.
Making appointments to the FRC's Enforcement Committee and performing the functions envisaged for the Conduct Committee under the Auditor Regulatory Sanctions Procedure (for local audit matters) and Crown Dependencies Recognised Auditor Sanctions Procedure (Crown Dependency matters).
Enforcement case review: information presented by the Case Examiner, General Counsel and Executive Counsel to support its decision-making role, ensuring thorough discussion and scrutiny of that information.
Risk management: emerging issues, risks or delays relating to open investigations.
KPIs and milestones: how the progress of investigations is measured and monitored.
Regulation and procedures: proposed amendments to the AEP, Schemes and associated guidance.
Publication of enforcement action: the timing and content of certain enforcement-related publications.
Succession planning: the composition and recruitment of Tribunal and Enforcement Committee panels.
Budget approvals: reviewed and approved budgets for investigations and enforcement.

20. Regulatory Standards and Codes Committee report

I am pleased to present the Regulatory Standards and Codes Committee report for the year ended 31 March 2024, which provides an overview of the work of the Committee and the key matters it addressed over the year.

The Committee's work has focused on the review of new and revised standards, Codes and guidance the FRC either monitors and inspects against, or issues to drive good practice in the provision and assurance of high-quality reporting.

Key highlights include the revised UK Corporate Governance Code, publication of AS TM1 to support the development of the government's pension dashboard, a Competition policy paper setting out how the FRC proposes to deliver and promote effective competition in the market for statutory audit, and the periodic review of FRS 102 and the Professional Judgement Framework.

Hannah Nixon Chair of the Regulatory Standards and Codes Committee

Role of the committee

The committee is responsible for approving and overseeing high-quality, effective and proportionate standards, guidance, Statements of Recommended Practice (SORPs), Practice Notes, and Codes for corporate governance, stewardship, audit and assurance, actuarial and corporate reporting work on behalf of the Board. A full summary of the committee's business can be found on our website.

Membership and attendance

Members	Attendance
Hannah Nixon (Chair)	8/8
Clare Thompson	8/8
Sir Jan du Plessis (appointed 11/9/23)	5/5
John Coomber (retired 22/7/23)	3/3
Sir Ashley Fox (resigned 11/9/23)	3/3
Senior Advisers
Richard Lawrence	8/8
Howard Walpole	8/8
Paul Cox (retired 31/12/23)	6/6
Fiona Ellard (appointed 01/1/24)	2/2

Hannah Nixon Chair of the Regulatory Standards and Codes Committee

Role of the committee

Membership and attendance

Members	Attendance
Hannah Nixon (Chair)	8/8
Clare Thompson	8/8
Sir Jan du Plessis (appointed 11/9/23)	5/5
John Coomber (retired 22/7/23)	3/3
Sir Ashley Fox (resigned 11/9/23)	3/3
Senior Advisers
Richard Lawrence	8/8
Howard Walpole	8/8
Paul Cox (retired 31/12/23)	6/6
Fiona Ellard (appointed 01/1/24)	2/2

Key areas of focus

The committee provided non-executive oversight and challenge to the Executive on regulatory standards, Codes and guidance including:

Actuarial policy work: revisions to Technical Actuarial Standards 300 ‘Pensions' and 400 'Funeral Plan Trusts'. Changes to AS TM1 – actuarial assumptions and methods to be used in the calculation of Statutory Money Purchase Illustrations.
Financial reporting: support for clear and concise, fair, balanced and understandable reporting. Considerations of amendments to UK GAAP following a periodic review, including new supplier finance reporting requirements issued by the International Accounting Standards Board (IASB).
Audit: revision of the FRC's Ethical Standard for Auditors and publication of revised auditing standards including ISA (UK) 505 – 'External Confirmations, and consultations on revised standards to address non-compliance with law and regulation'.
Digital reporting: actions to improve the usability and design of the reports and XBRL tagging, as well as updates to the UK Taxonomy Suite.
Key publications: publication of a Minimum Standard for Audit Committees in response to a recommendation by the Competition and Markets Authority, and a Competition Policy Paper.
Corporate governance: finalised updates to the UK Corporate Governance Code and associated guidance.

21. Supervision Committee Report

I am pleased to present the Supervision Committee report for the year ended 31 March 2024, which provides an overview of the work of the Committee and the key matters it addressed over the year.

Since I took over as Chair following the retirement of John Coomber in July 2023, I am pleased to see that audit quality continues to improve, particularly in the larger systemically important firms.

This year has focused on embedding our role as the interim shadow system leader, which included testing and developing the proposals to address the backlog in Local Audit, in collaboration with the DLUHC.

During the year we published our reporting expectations for companies amidst a period of ongoing economic uncertainty. I was pleased to see that the quality of corporate reporting in the UK remains good.

To deepen and strengthen our supervision of the Professional Bodies, building on the existing successful FRC supervision model for audit firms, the Professional Oversight Team was restructured and is now known as Professional Bodies Supervision. We achieved our 2023/24 priorities set out in the Annual Report

Our areas of Supervisory focus for 2024/25, for corporate reporting reviews and audit quality inspections include construction and materials, food producers, gas, water and multi-utilities, industrial metals and mining, and retail.

The Committee continues to support the FRC in promoting high professional standards in accounting, audit, actuarial work and corporate reporting.

Ruwan Weerasekera Chair of the Supervision Committee

Role of the committee

The Committee is responsible for overseeing the FRC's delegated statutory supervisory and oversight functions and its non-statutory monitoring work. It receives regular updates from the six teams within the Supervision division on its approach, outputs and outcomes, and considers emerging issues and risks in relation to the delivery of the FRC's supervisory objectives. It has delegated authority from the Board to exercise its powers in relation to companies' compliance with UK corporate reporting laws. It also oversees the discharge of the FRC's responsibilities, designated by the Secretary of State, to provide independent oversight of the professional and qualifying bodies, and the Comptroller and Auditor General, and to report on the discharge of these responsibilities to Parliament each year.

Membership and attendance

Members	Attendance
Ruwan Weerasekera (appointed 24/07/23) (Chair)	5/5
Angela Cha	5/5
Hannah Nixon	3/5
John Coomber (retired on 22/07/23)	1/1
Senior Advisers
Andrew Vials	4/5
Anne Whitaker	5/5
John Hitchins (retired on 31/12/23)	3/4

Key areas of focus 2023/24

The committee provided non-executive oversight and challenge to the Executive on Supervision matters including:

PIE Registration process: the GIAA moderate opinion on the internal audit of the adequacy and effectiveness of the new PIE registration arrangements.
Professional oversight: during the year we signed letters of Understanding on Mutual Recognition of Statutory Audit Qualifications with Switzerland, New Zealand and Australia, respectively to mutually recognise their audit qualification in the UK and the UK qualification in their jurisdiction.
Scalebox: Scalebox launched to promote competition and quality for smaller audit firms (frc.org.uk).
Key publications: the Annual Review of Corporate Reporting, the Tier 1 audit firms Overview Report, the annual inspection findings for Tier 2 and Tier 3 audit firms, the annual review of competition in the audit market for public interest entities (PIE), and a report on the quality of major local audits amid delays in local government.

22. Audit & Risk Committee Report

I am pleased to present the Audit & Risk Committee report for the year ended 31 March 2024, which provides an overview of the work of the Committee and the key matters it addressed over the year. The Committee continues to support the Board in its review of the integrity of financial reporting and ensuring that risk management and internal controls remain robust and appropriately managed.

Key activities considered by the Committee during the year include:

Review of the risk management framework, principal risks and risk appetites.
Review of the Reserves Policy.
Review of the Annual Report and Accounts, for recommendation to the Board.
Receipt of regular updates on the FRC's responsibility for overseeing UKEB compliance with due process.
Oversight of the activities of the internal audit function and external auditors, including an evaluation of their effectiveness, based on the Committee's own interaction with the internal and external auditors, as well as a questionnaire with key internal stakeholders. Both were deemed effective.
Supported the adoption of IFRS accounting standards for the FRC's own annual report and accounts.
Reviewed and considered the FRC's Counter Fraud and Anti-Bribery policy and controls, in particular arrangements for employees to raise concerns in confidence relating to improprieties in financial reporting and other related matters.
Its own effectiveness as part of the External Board and Committee Performance Review.

The Committee also receives regular and relevant updates from the Finance team to ensure that the FRC has complied with its obligations as set out in Managing Public Money.

The focus for 2024 will be ensuring the FRC's new risk management framework is embedded in the organisation's overall assurance framework.

Clare Thompson Chair of the Audit & Risk Committee

Role of the committee

The Audit & Risk Committee supports and advises the Accounting Officer (the Chief Executive) and the Board by providing oversight of our financial reporting process and use of public funds, corporate governance, the external and internal audit process, the system of internal controls including business continuity and information technology, the identification and management of significant risks, and compliance with laws and regulations. The Audit & Risk Committee's Terms of Reference can be viewed on our website.

The committee held five meetings in the 2023/24 financial year. Members of the committee also attended training sessions for NEDs run by the Head of Risk. In addition, the committee met (without the presence of management) with the external and internal auditors from the NAO and GIAA respectively.

The committee is composed of individuals with recent and relevant audit, risk and financial experience, both in the private and public sectors, and listed environments. The Chair, Clare Thompson, is an ICAEW Chartered Accountant and former Audit Partner, with non-executive experience including as an Audit Committee Chair.

Michael Hearty, Senior Adviser, is also appointed to the committee and brings public sector finance background including experience of organisations undergoing transformation. The biographies of the committee members can be found on our website. With these appointments, the Board is satisfied that the combined knowledge and financial experience of the committee members ensured that it could fulfil its responsibilities effectively.

Membership and attendance

Members	Attendance
Clare Thompson FCA (Chair)	5/5
Angela Cha	5/5
Hannah Nixon	5/5
Ruwan Weerasekera	5/5
Senior Adviser
Michael Hearty (FCPFA)	3/5

Other regular attendees at the Audit & Risk committee meetings

FRC Chair, Accounting Officer, Finance Director, Executive Director of Corporate Services and General Counsel, Head of Risk, NAO, GIAA.

External auditor independence

The NAO was appointed as external auditor in 2019 with Greg Wilson as Senior Statutory Auditor. Greg is not part of the NAO's Central Quality team, nor responsible for PIE audits inspected by the FRC. The Board reviews how the relationship and any potential conflicts of interest between the NAO and FRC are mitigated each year prior to appointing the FRC's external auditors. To protect the objectivity and independence of the external auditor, it is the FRC's policy that it is not contracted to carry out any non-audit services, and no such services were provided during the financial year. The Audit Partner will rotate in 2024, following the signing of the accounts.

Financial reporting

The Committee reviewed and recommended to the Board the Annual Report and Financial Statements for the financial year ended 31 March 2024, having confirmed that it satisfied all applicable legal and regulatory obligations. The committee also considered the letter of support and representation issued to the auditors and received the auditors ISA 260 report setting out any matters arising from the audit. The committee concluded that the financial statements should continue to be prepared on the going concern basis of accounting, given DBT's Letter of Comfort.

Fair, balanced and understandable

In assessing whether the Annual Report and Accounts are fair, balanced and understandable, on behalf of the Board, the Audit & Risk Committee gave regard to:

The information contained within the Strategic Report and ensuring it represents a fair reflection of performance during the year under review.
Key judgement areas, accounting and reserves policies.
The KPIs agreed by management, ensuring they reflect those used to manage, monitor and assess the organisational health of the FRC with a strong linkage to the strategy.
The key messages in the Annual Report and ensuring they are clear, consistent and easily understood.

Internal audit opinion 2023/24

A key source of independent assurance for the FRC is the internal audit function provided by the GIAA, which complies with the Public Sector Internal Audit Standards. The annual internal audit programme is closely linked to the key risks and strategic objectives of the organisation. Arrangements are in place to ensure that the Accounting Officer is made aware of any significant issues which indicate that key risks are not being effectively managed.

The GIAA provided an overall 'moderate' opinion on the governance, risk management and control for 2023/24. This is a slight improvement on previous years, reflecting a strengthening in the control environment demonstrated by the work undertaken by the FRC to improve organisational structure and approach to customer engagement. Work continues to improve the maturity of risk management, with the refreshing of the Principal and Divisional Risk Register and a greater focus at senior levels on mitigating actions to reduce risk exposure. Work has started to identify the high-level internal controls with work ongoing to map these key risks. We will work with the GIAA to develop a programme to test each of the key internal controls and improve our risk maturity level from level 2 'emerging' to level 3 'defined'.

23. People Committee Report

I am pleased to present the People Committee report for the financial year ended 31 March 2024 which provides an overview of the work of the Committee and the key matters it addressed over the year.

This is my first year reporting as Chair of the Committee, following the retirement of Ruwan Weerasekera who stepped down to undertake the Chairmanship of the Supervision Committee. We also amended the composition of the Committee to include all members of the Board to recognise the importance of people matters at the FRC.

The work of the Committee over the year has focused on succession planning with recruitment for the Board, Senior Advisers and Advisory Panel and the annual staff pay review process being key focus areas. The Committee also commissioned the external Board performance review, received feedback from staff on delivery of the strategy through the staff survey and reports from the People Forum. Updates on the refreshed Diversity and Inclusion strategy to be launched this year were also considered as well as the learning and development opportunities offered to staff. We also received updates from management on the opening of the new office in Birmingham. Finally, our work plan also included regular review of people matters, discussions on organisational culture, hybrid working, and compliance matters such as the registers of interests and expenses.

Sir Jan du Plessis Chair of the People Committee

Role of the committee

The Committee provides strategic direction on issues relating to the appointment and recruitment, remuneration, talent management and welfare of FRC staff and non-executive members and advisors. The NED with responsibility for workforce engagement regularly reports into this committee to improve visibility of people matters at Board and Committee level. The committee met five times in 2023/2024.

Membership and attendance

Members	Attendance
Sir Jan du Plessis (Chair)	5/5
Clare Thompson	5/5
Ruwan Weerasekera	4/5
David Willis	5/5
Angela Cha	5/5
Hannah Nixon	5/5

Key areas of focus

The committee provided non-executive oversight and challenge to the Executive on people matters including:

Staff wellbeing: staff learning and development opportunities and the staff survey results to support staff wellbeing.
CEO Priorities: the CEO's short, medium and long-term priorities for the organisation. The committee also agreed the CEO's objectives for the year.
Diversity and inclusion: our diversity and inclusion initiatives and our diversity policy to foster an inclusive organisation. For example, we have several staff-led diversity groups to help support and develop employee knowledge of equality and inclusion matters.
Succession plans and staff pay award: the Board skills matrix, identifying areas of experience that would complement and add value to the Board. Also carried out Board and non-executive adviser succession planning and recruitment to support FRC strategy and reviewed the annual pay award.
Other key matters: received regular updates from the Chief People Officer on HR matters, commissioned the External Board and Committee Performance Review, monitored the conflicts of interest, gifts and hospitality, and Board and Executive Committee expenses and associated policies.

24. Remuneration Report

The Chief Executive is the only Executive member of the Board. The performance of the Chief Executive and other Executive Committee members is assessed against both collective objectives set in line with the FRC Plan and Budget and individual objectives. An overview of the remuneration framework that applied to all staff during 2023/24 is set out below. The main components of the Chief Executive and other Executive Committee members' remuneration are consistent with this framework unless indicated otherwise.

Element and purpose	Operation	Opportunity / output
Base salary	Salaries are normally reviewed annually by the Committee, which considers the Chief Executive and other Executive Committee members' responsibilities, performance and experience alongside market trends and relevant comparator organisations, where available.	Any annual increase awarded reflects movement in market rates and increasing competency within role.
	Salaries for new Chief Executive and other Executive Committee member appointments are subject to HM Treasury approval in line with Senior Civil Service Pay Guidance.	The Chief Executive and Executive Committee members are required to achieve higher ratings for performance than other members of staff in order to qualify for a potential salary increase.
		Individual adjustments in excess of general market movements may be made in appropriate circumstances (for example, where the role scope has changed or as a reflection of a significant development in the role).
Benefits	All staff who were offered employment prior to 1 June 2018 are eligible to receive benefits, which may include:
	* dental insurance
	* private health insurance
	* income protection insurance
	* life insurance
	In aligning the FRC's remuneration policy more closely with the public sector, new joiners who started from 1 June 2018 are no longer eligible for dental or private health insurance.
Pension benefits	All staff are eligible to participate in the group personal pension scheme, which is a defined contribution scheme.	A maximum of 10% of base salary.
	Staff offered employment prior to 1 June 2018 were able to elect to take pay in lieu of pension contributions less an amount equivalent to Employer's National Insurance contributions, but this has been discontinued for staff offered employment after 1 June 2018.
Non-Consolidated Pay	The FRC provides a modest cash award to all eligible employees with qualifying service and personal performance reflecting the overall performance of the FRC during the year.	An in-year award of £1,500 was made to all qualifying employees.

25. Remuneration Framework – Pay Multiples and Director Remuneration

Pay multiples (subject to audit)

Reporting bodies are required to disclose the relationship between the remuneration of the highest paid Director in their organisation and the median remuneration of the organisation's workforce.

The banded remuneration per annum of the highest paid Director, the Chief Executive Officer, in office as of 31 March 2024 was £330,000 – £335,000 per year (2022/23: £330,000 – £335,000). This was 3.46 times (2022/23: 3.67) the median remuneration of the workforce, which was £96,215 (2022/23: £91,139).

Total remuneration includes salary and benefits in kind. It does not include severance payments, or any employer's pension allowance or payments in lieu of pension payments. In 2023/24, no employee received remuneration in excess of the annual equivalent remuneration of the highest paid Director.

Directors' remuneration

	2023/24 fees/salary	2023/24 GHI¹	2023/24 Pension²	2023/24 Total £	2022/23 Total £
Non-Executive Directors
Sir Jan du Plessis	125,000	-	-	125,000	125,000
Angela Cha	17,500	-	-	17,500	17,500
John Coomber (to 22/07/23)	8,462	-	-	8,462	27,500
Sir Ashley Fox (to 11/09/23)	7,763	-	-	7,763	17,500
Hannah Nixon	27,500	-	-	27,500	27,500
Clare Thompson	27,500	-	-	27,500	27,500
Ruwan Weerasekera	25,936	-	-	25,936	22,500
David Willis	30,000	-	-	30,000	30,000
Sub-total	269,661	-	-	269,661	295,000
Executive Directors
Sir Jonathan Thompson³ (to 31/07/23)	61,981	-	5,500	67,481	305,250
Sarah Rapson⁴ (01/08/23-01/10/23)	61,825	-	-	61,825
Richard Moriarty³ (from 02/10/23)	165,000	2,934	16,500	184,434	0
Sub-total	288,806	2,934	22,000	313,740	305,250
Total⁵	558,467	2,934	22,000	583,401	600,250

Notes: When Directors have served for part of a year, the amounts shown are for the relevant proportion of the year.

26. Directors' Report

The Directors of the FRC (Registered number: 02486368) present their report for the year ended 31 March

This report should be read in conjunction with both the Strategic Report, page 23, which includes Ethics and compliance (page 35), and the Governance Report, page 56, which includes the Corporate Governance Statement.

In accordance with section 414C (11) of the Companies Act 2006, the Directors have provided disclosures and information in relation to a number of matters elsewhere in this Annual Report. These matters, together with those required under the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 as amended in 2013, and voluntary disclosures under the Sustainability Accounting Standards Board (SASB) are cross-referenced in the table below.

Topic/reporting responsibility	Relevant section	Page
Business model	Our Business Model	11
Values	Our Business Model	11
Strategy	Strategic Priorities for 2024 to 2025	23
Likely future developments	Strategic Priorities for 2024 to 2025	23
Principal activities	Chief Executive's Report	15
Research and development activities	Chief Executive's report	15
Analysis of performance and current position	KPIs	26
	Financial statements	102
Post balance sheet events	Notes to the Financial Statements	106
Factors affecting future development and long-term viability	Risk management	44
Principal risk and risk management policies	Risk management	44
Financial risks	Financial Review	41
	Notes to the Financial Statements	106
Reviews of internal controls	Audit & Risk Committee Report	79
Anti-bribery policy	Ethics and Compliance	35
Whistleblowing	Ethics and Compliance	35
Procurement policy	Ethics and Compliance	35
Payment practices	Ethics and Compliance	35
Modern Slavery Statement	Ethics and Compliance	35
Section 172 Statement	Section 172 and Stakeholder Engagement	31
Stakeholder interests	Section 172 and Stakeholder Engagement	31
Gender pay gap reporting	Our People and Culture Framework	28
Pay ratios	Remuneration Framework - Pay Multiples and Director Remuneration	86
Corporate governance statement	Governance and Transparency Framework	56
Names of Directors holding office	Governance and Transparency Framework	56
Statement on employment of disabled persons	Our People and Culture Framework	28
Streamlined Energy and Carbon Reporting	Environmental Impacts	32
Data security (SASB)	Ethics and Compliance	35
Workforce diversity and engagement (SASB)	Our People and Culture Framework	28
Professional integrity (SASB)	Ethics and compliance	35

Directors' responsibilities statement

The Directors (including the Chief Executive as Accounting Officer) are responsible for preparing the Annual Report and Financial Statements in accordance with applicable laws and regulations. Company law requires the Directors to prepare financial statements for each financial year.

The Directors have elected to prepare the financial statements in accordance with applicable law and UK accounting standards (UK GAAP), including FRS 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland. The Directors must not approve the financial statements unless satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for the period.

In preparing these financial statements, the Directors are required to:

Select suitable accounting policies and apply them consistently.
Make judgements and accounting estimates that are reasonable and prudent.
State whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements.
Ensure a system of internal controls are in place to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the FRC will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the FRC's transactions and disclose with reasonable accuracy at any time the financial position of the FRC and enable the Directors to ensure that the financial statements comply with the Companies Act 2006.

They are also responsible for safeguarding the assets of the FRC and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

In assessing the going concern, the Board is satisfied that the FRC will continue to operate for a minimum of 12 months after the approval of the financial statements. In addition, DBT provides the FRC with confirmation that it would help the FRC meet its financial obligations, if necessary, that would allow the FRC to continue its operations for a minimum of 12 months.

The Directors consider that the Strategic Report is fair, balanced and understandable, and that it contains the information necessary for the user to assess the position, performance, business model and strategy of the FRC.

Board of Directors

We have included information on the names of the individuals who, at any time during the financial year, were Directors of the FRC on page 63 as well as their attendance.

Appointment of Directors

Directors are appointed for fixed terms, which may be renewed, rather than being submitted for re-election at regular intervals. There were changes to the Company Directors during the financial year under review. NEDs John Coomber and Sir Ashley Fox resigned from the Board on the 22 July and 11 September 2023 respectively. Sir Jon Thompson, as CEO and Director, retired from the Board on 31 July

Richard Moriarty was appointed to the Board as CEO and Director on 2 October 2023.

Retirement, vacation and removal of Directors

In accordance with the Articles of Association, the Secretary of State, or his or her duly authorised representative, may at any time remove any person so appointed. A Director of the company shall retire from office upon the expiry of the period specified in the most recent notice of his or her appointment or reappointment received by the company, or if no period is specified therein, upon the third anniversary of such appointment or reappointment.

The office of Director shall be vacated if the Director:

Is removed from office pursuant to the provisions of Articles of Association 5.1.
Resigns his or her office by notice in writing received at the registered office of the company.
Ceases to be a member of the company.
Ceases to be a Director by virtue of any provision of the Companies Act or otherwise becomes prohibited by law from being a Director.
In the case of the Chief Executive, ceases to hold that position.

Directors and Directors' insurance and indemnities

Under the terms of the FRC's Articles of Association, all Directors are members of the FRC, and each has undertaken to guarantee the liability of the FRC up to an amount not exceeding £1. There are no other members, and no dividend is payable. The FRC purchased and maintained the Directors' and officers' liability insurance in respect of itself and for its Directors and officers throughout the financial year. This gives appropriate cover for any legal action brought against the FRC or its Directors or officers.

Articles of Association

The company's Articles may be amended by a special resolution of the company members.

Related party transactions are disclosed in Note 16 to the Accounts.

Political donation disclosures

As a central government body, the FRC is compliant with Managing Public Money. Political affiliations and disclosures are not consistent with the principles of Managing Public Money. No political donations were made during the year.

Key contracts

The FRC has a number of key contracts. However, the FRC performs several checks on the providers of those contracts including financial health checks. As part of the FRC's Business Continuity Planning, scenario testing is undertaken in respect of the failure of one of the firms providing the key contracts.

Company's trading activities

The FRC is not a trading company. There have been no changes in corporate structure.

Disclosure to the auditor

The Directors, including the Chief Executive as Accounting Officer, at the date of this report, confirm that, as far as they are aware, there is no relevant audit information of which the FRC's auditor is unaware. Each Director has taken all steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the FRC's auditor is aware of that information.

Auditors

The NAO, on behalf of the Comptroller and Auditor General, has expressed its willingness to remain in office. The Audit & Risk Committee's conclusions reached were that the NAO has continued to perform the external audit in a professional and efficient manner and is deemed to be reappointed.

Approved by the Board of Directors on 26 June 2024 and signed on its behalf by:

A handwritten signature.

Richard Moriarty CEO and Accounting Officer

27. Independent Auditor's Report to the Members of The Financial Reporting Council Limited

Opinion on financial statements

I have audited the financial statements of The Financial Reporting Council Limited ('the FRC') for the year ended 31 March 2024 which comprise the FRC's

Balance Sheet as at 31 March 2024;
Profit and Loss Account, Statement of Changes in Equity, Cash Flow Statement for the year then ended; and
the related notes including the principal accounting policies.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and the United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In my opinion the financial statements:

give a true and fair view of the state of the FRC's affairs as at 31 March 2024 and of the loss for the year then ended;
have been properly prepared in accordance with the United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on regularity

In my opinion, in all material respects the income and expenditure recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.

Basis for opinions

I conducted my audit in accordance with International Standards on Auditing (UK) (ISAs (UK)), applicable law and Practice Note 10 ‘Audit of Financial Statements and Regularity of Public Sector Bodies in the United Kingdom (2022)'. My responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of my report. Those standards require me and my staff to comply with the Financial Reporting Council's Revised Ethical Standard

I am independent of the FRC in accordance with the ethical requirements that are relevant to my audit of the financial statements in the UK. My staff and I have fulfilled our other ethical responsibilities in accordance with these requirements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

The framework of authorities described in the table below has been considered in the context of my opinion on regularity.

Framework of Authorities
Authorising legislation	Companies Act 2006
	Statutory Audit and Third Country Auditor Regulations (SATCAR) 2013, 2016 and 2017
	Local Audit (Delegation of Functions) and Statutory Audit (Delegations of Functions) Order 2014
	Local Audit and Accountability Act 2014
HM Treasury and related authorities	Managing Public Money

Conclusions relating to going concern

In auditing the financial statements, I have concluded that the FRC's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

My evaluation of the director's assessment of the entity's ability to continue to adopt the going concern basis of accounting included review of management's forecasts and sensitivity analysis, and obtaining and reviewing a signed letter of support that has been provided by the Department for Business and Trade.

Based on the work I have performed, I have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the FRC's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

In relation to the FRC's reporting on how they have applied the UK Corporate Governance Code, I have nothing material to add or draw attention to in relation to the directors' statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting.

My responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Overview of my audit approach

Key audit matters

Key audit matters are those matters that, in my professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditor, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.

These matters were addressed in the context of the audit of the financial statements as a whole, and in forming my opinion thereon. I do not provide a separate opinion on these matters.

This is not a complete list of all risks identified though the course of my audit but only those areas that had the greatest effect on my overall audit strategy, allocation of resources and direction of effort. I have not, for example, included information relating to the work I have performed around expenditure, an area where my work has not identified any significant matters to report.

The key audit matters were discussed with the Audit and Risk Committee; their report on matters that they considered to be significant to the financial statements is set out on pages 79-81.

In this year's report there are no significant changes to the risks identified in my prior year report.

Key audit matter 1 – Risk of fraud in revenue recognition

Description of risk

It is a rebuttable presumption that there is a significant risk of error in revenue recognition. The risk of fraud in revenue recognition has been considered to be one of the most significant assessed risks of material misstatement for the FRC, as it receives income from a variety of sources (as reflected in the revenue note 2 in the financial statements) and therefore has a heightened inherent risk. Whilst I understand that there have been no significant changes to sources of revenue nor the accounting policies in this year, the FRC's revenue has grown to £58.40m in the year (2022-23: £50.99m) essentially due to higher collections and contributions from Accountancy professional bodies. The following risk characteristics also exist:

Income arises from a number of sources, and several of these are voluntary;
The FRC use a third-party service organisation to invoice some of their voluntary levies, although those levies are received directly into a Financial Reporting Council bank account;
There is a material accrued income balance on the year-end balance sheet; and
The uncertain economic environment may result in difficulties collecting voluntary levies.

Therefore, I have identified this as a key audit matter.

How the scope of my audit responded to the risk

My team reviewed the design and implementation of controls in place over revenue. These controls were not relied upon for audit assurance.

My team reviewed all material revenue streams to confirm that revenue is recognised appropriately in line with the FRC's stated accounting policies, and FRS102. Revenue in respect of voluntary contributions (levy revenue) is recognised on a cash basis, therefore for a selected sample of levy receipts we agreed them back to the bank statement.

My team reviewed the completeness of trade receivables and accrued income at year end to assess the appropriateness of their recognition. No evidence of management bias was identified during the course of our work.

Key observations

My testing results were satisfactory.

Key audit matter 2 - Risk of management override of controls

Description of risk

ISAs (UK) include a non-rebuttable risk that management could perpetrate fraud or manipulate accounting records. Accordingly, I am required to perform procedures in response to this risk. Whilst the other significant risk was also designed to respond to the risk of fraud through management override of controls, (specifically in relation to revenue) due to the unpredictable nature of this risk I also performed more general procedures to gain assurance. Account areas that are particularly susceptible to management override of control are those areas where there has been a change to an established system/process/practices, and account areas where there are high levels of estimation and judgement.

How the scope of my audit responded to the risk

My team reviewed key financial processes and controls, and carried out transaction testing on a sample basis. Controls were not relied upon for audit assurance.

My team used data analytics to review the manual journals posted, looking for key risk factors identified through our discussion of potential fraud and management override risks, and they tested any such journals. We also considered accounting estimates, such as the leasehold improvement and dilapidations provision, and judgements for evidence of bias, including a retrospective review of judgements and assumptions.

My team reviewed the general ledger and bank statements, committee papers and wider audit work across the financial statements to support discussions with management in seeking to identify significant transactions that appeared to be outside the normal course of business.

Key observations

My testing results were satisfactory.

Application of materiality

Materiality

I applied the concept of materiality in both planning and performing my audit, and in evaluating the effect of misstatements on my audit and on the financial statements. This approach recognises that financial statements are rarely absolutely correct, and that an audit is designed to provide reasonable, rather than absolute, assurance that the financial statements are free from material misstatement or irregularity. A matter is material if its omission or misstatement would, in the judgement of the auditor, reasonably influence the decisions of users of the financial statements.

Based on my professional judgement, I determined overall materiality for the FRC's financial statements as a whole as follows:

Materiality	£938,000
Basis for determining materiality	1.5% of total expenditure of £63m (2022-23: 1.5% of total expenditure of £51m).
Rationale for the benchmark applied	I considered a number of benchmarks for materiality, including profit, revenue, asset measures and equity. Given that the FRC is a regulator, it incurs costs in fulfilling its responsibilities and collects funding sufficient to cover those costs. Consequently, the users of the financial statements will principally be interested in the cost of the FRC discharging its responsibilities. Mindful of this, I identified total expenditure as the key driver.

Materiality

£938,000

Basis for determining materiality

1.5% of total expenditure of £63m (2022-23: 1.5% of total expenditure of £51m).

Rationale for the benchmark applied

I considered a number of benchmarks for materiality, including profit, revenue, asset measures and equity. Given that the FRC is a regulator, it incurs costs in fulfilling its responsibilities and collects funding sufficient to cover those costs. Consequently, the users of the financial statements will principally be interested in the cost of the FRC discharging its responsibilities. Mindful of this, I identified total expenditure as the key driver.

Performance Materiality

I set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Performance materiality was set at 75% of materiality for the 2023-24 audit (2022-23: 75%). In determining performance materiality, I have also considered the uncorrected misstatements identified in the previous period.

Other Materiality Considerations

Apart from matters that are material by value (quantitative materiality), there are certain matters that are material by their very nature and would influence the decisions of users if not corrected. Such an example is any errors reported in the Related Parties note in the financial statements. Assessment of such matters needs to have regard to the nature of the misstatement and the applicable legal and reporting framework, as well as the size of the misstatement.

I applied the same concept of materiality to my audit of regularity. In planning and performing audit work to support my opinion on regularity and in evaluating the impact of any irregular transactions, I considered both quantitative and qualitative aspects that would reasonably influence the decisions of users of the financial statements.

Error Reporting Threshold

I agreed with the Audit and Risk Committee that I would report to it all uncorrected misstatements identified through my audit in excess of £18,760, as well as differences below this threshold that in my view warranted reporting on qualitative grounds. I also report to the Audit Committee on disclosure matters that I identified when assessing the overall presentation of the financial statements.

Total unadjusted audit differences reported to the Audit and Risk Committee have decreased net expenditure by £54,000.

Audit scope

The scope of my audit was determined by obtaining an understanding of the FRC and its environment, including the entity wide controls, and assessing the risks of material misstatement.

My team and I met virtually and in person with senior members of the company's finance team and members of the Executive and Audit & Risk Committee as part of the audit planning process. This resulted in the identification of two significant risks within the audit plan, which are shown in key audit matters above. This dialogue continued throughout the audit process, as I reassessed and re-evaluated audit risks where necessary, and amended my approach accordingly. This included consideration, for example, of the continued impact of the DBT consultation on audit and corporate governance reform.

My planning and audit work procedures were undertaken both remotely and in person. I have provided a regularity opinion within this report. My team discussed the framework of authorities with management and reviewed the results of transaction testing to determine whether any evidence of material irregularity was noted.

Other Information

The other information comprises the information included in the Annual Report, but does not include the financial statements and my auditor's report thereon. The directors are responsible for the other information.

My opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in my report, I do not express any form of assurance conclusion thereon.

My responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or my knowledge obtained in the audit, or otherwise appears to be materially misstated.

If I identify such material inconsistencies or apparent material misstatements, I am required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact.

I have nothing to report in this regard.

Opinion on other matters prescribed by the Companies Act 2006

In my opinion the part of the ‘Remuneration Framework' section of the Annual Report to be audited has been properly prepared in accordance with the Companies Act 2006.

In my opinion, based on the work undertaken in the course of the audit:

the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements;
the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements; and
the information about internal control and risk management systems in relation to financial reporting processes, and about share capital structures, in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Rules and Transparency Rules sourcebook made by the Financial Conduct Authority (the FCA Rules), is consistent with the financial statements and has been prepared in accordance with applicable legal requirements; and
information about the FRC's corporate governance code and practices and about its administrative, management and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.

Matters on which I report by exception

In the light of the knowledge and understanding of the FRC and its environment obtained in the course of the audit, I have not identified material misstatements:

in the Strategic Report or the Directors' Report; or
the information about internal control and risk management systems in relation to financial reporting processes and about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 of the FCA rules.

I have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires me to report to you if, in my opinion:

adequate accounting records have not been kept or returns adequate for my audit have not been received from branches not visited by my staff; or
I have not received all of the information and explanations I require for my audit; or
the financial statements and the parts of the ‘Remuneration Framework' section of the Annual Report to be audited are not in agreement with the accounting records and returns; or
certain disclosures of director's remuneration specified by law are not made; or

Governance

The Listing Rules require me to review the Directors' statement in relation to going concern, longer-term viability and that part of the Governance section of the Annual Report relating to the FRC's compliance with the provisions of the UK Corporate Governance Code specified for my review.

Based on the work undertaken as part of my audit, I have concluded that each of the following elements of the Governance section of the Annual Report is materially consistent with the financial statements or my knowledge obtained during the audit:

Directors' statement with regards the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on pages 88-89;
Directors' explanation as to its assessment of the entity's prospects, the period this assessment covers and why the period is appropriate set out on pages 88-89;
Directors' statement on fair, balanced and understandable set out on pages 88-89;
Board's confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 44-52;
The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on pages 44-52; and
The section describing the work of the audit committee set out on pages 79-81.

Responsibilities of the Directors for the financial statements

As explained more fully in the Directors' responsibilities statement that is set out within the Directors' Report, the directors are responsible for:

maintaining proper accounting records;
providing the C&AG with access to all information of which management is aware that is relevant to the preparation of the financial statements such as records, documentation and other matters;
providing the C&AG with additional information and explanations needed for his audit;
providing the C&AG with unrestricted access to persons within the FRC from whom the auditor determines it necessary to obtain audit evidence.
preparing financial statements, which give a true and fair view, in accordance with the Companies Act 2006;
ensuring such internal controls are in place as deemed necessary to enable the preparation of financial statement to be free from material misstatement, whether due to fraud or error;
preparing the Annual Report, which includes the ‘Remuneration Framework' section, in accordance with the Companies Act 2006; and
assessing the FRC's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

My responsibility is to audit and report on the financial statements in accordance with the applicable law and International Standards on Auditing (UK) (ISAs (UK)).

My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a report that includes my opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Extent to which the audit was considered capable of detecting non-compliance with laws and regulations including fraud

I design procedures in line with my responsibilities, outlined above, to detect material misstatements in respect of non-compliance with laws and regulations, including fraud. The extent to which my procedures are capable of detecting non-compliance with laws and regulations, including fraud is detailed below.

In identifying and assessing risks of material misstatement in respect of non-compliance with laws and regulations, including fraud, I:

considered the nature of the sector, control environment and operational performance including the design of the FRC's accounting policies, and key performance indicators.
inquired of management, FRC's head of internal audit and those charged with governance, including obtaining and reviewing supporting documentation relating to the FRC's policies and procedures on:
- identifying, evaluating and complying with laws and regulations;
- detecting and responding to the risks of fraud; and
the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations including the FRC's controls relating to the FRC's compliance with the Companies Act 2006, and Managing Public Money;
inquired of management, the FRC's head of internal audit and those charged with governance whether:
- they were aware of any instances of non-compliance with laws and regulations; and
- they had knowledge of any actual, suspected, or alleged fraud;
discussed with the engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.

As a result of these procedures, I considered the opportunities and incentives that may exist within the FRC for fraud and identified the greatest potential for fraud in the following areas: revenue recognition, posting of unusual journals, complex transactions, and bias in management estimates. In common with all audits under ISAs (UK), I am required to perform specific procedures to respond to the risk of management override.

I obtained an understanding of the FRC's framework of authority and other legal and regulatory frameworks in which the FRC operates. I focused on those laws and regulations that had a direct effect on material amounts and disclosures in the financial statements or that had a fundamental effect on the operations of the FRC. The key laws and regulations I considered in this context included the Companies Act 2006; SATCAR 2013, 2016 and 2017; Local Audit (Delegation of Functions) and Statutory Audit (Delegation of Functions) Order 2014; Local Audit and Accountability Act 2014; Managing Public Money; and pensions legislation and employee tax legislation.

Audit response to identified risk

To respond to the identified risks resulting from the above procedures:

I reviewed the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described above as having direct effect on the financial statements;
I enquired of management, the Audit and Risk Committee and the Company Secretary concerning actual and potential litigation and claims;
I reviewed minutes of meetings of those charged with governance and the Board and internal audit reports;
I addressed the risk of fraud through management override of controls by testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made on estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business; and
I addressed the risk of fraud through revenue recognition, by substantively testing all material revenue streams to check revenue has been recognised in line with accounting policies; reviewing recognition and receivability of trade receivables and confirming all income received was in line with relevant laws and regulations; and
I considered the applicability of Managing Public Money in all of my transaction testing.

I communicated relevant identified laws and regulations and potential risks of fraud to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

Other auditor's responsibilities

A further description of my responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of my report.

I am required to obtain sufficient appropriate audit evidence to give reasonable assurance that the expenditure and income recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.

I communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control I identify during my audit.

Signed by:

Greg Wilson (Senior Statutory Auditor) 16 July 2024

For and on behalf of the Comptroller and Auditor General (Statutory Auditor) National Audit Office 157-197 Buckingham Palace Road Victoria London SW1W 9SP

28. Financial statements

The Financial Reporting Council Limited Registered number: 02486368

Profit and loss account for the year ended 31 March 2024

	Note	2023/24 £'000	2022/23 £'000
Revenue	2	58,396	50,985
Operating expenses	3	(59,581)	(51,143)
Operating loss		(1,185)	(158)
Interest receivable		0	0
Loss on ordinary activities before taxation		(1,185)	(158)
Tax on loss on ordinary activities	4	0	0
Loss for the financial year		(1,185)	(158)

Balance sheet as at 31 March 2024

	Note	31 March 2024 £'000	31 March 2023 £'000
Fixed assets
Intangible assets	7	4	25
Tangible assets	8	646	1,230
		650	1,255
Current assets
Debtors	9	8,866	11,304
Cash at bank and in hand	10	11,104	13,329
		19,970	24,633
Creditors – amounts falling due within one year	11	(5,370)	(9,130)
Provisions for liabilities	14	(419)	0
Net current assets		14,181	15,503

Total assets less current liabilities		14,831	16,758

Creditors – amounts falling due after more than one year	12	0	(347)
Provisions for liabilities	14	(10)	(405)
Net assets		14,821	16,006

Capital and reserves
Accounting, auditing and corporate governance:
- General reserve		4,276	5,654
- Corporate reporting review legal cost fund		2,000	2,000
Actuarial standards and regulation:
- General reserve		6,545	6,352
- Actuarial case cost fund		2,000	2,000
Total		14,821	16,006

The financial statements and notes on pages 102-118 were approved by the Board of Directors on 26 June 2024 and signed on its behalf by:

Richard Moriarty Chief Executive Officer and Accounting Officer

Sir Jan du Plessis Chair

Statement of changes in equity for the year ended 31 March 2024

	Accounting, auditing and corporate governance	Actuarial standards and regulation
	General reserve	Corporate reporting review legal cost fund	General reserve
	£'000	£'000	£'000
At 31 March 2022	5,914	2,000	6,250
Profit/(loss) for the year	(260)		102
At 31 March 2023	5,654	2,000	6,352
Profit/(loss) for the year	(1,378)		193
At 31 March 2024	4,276	2,000	6,545

Actuarial case cost fund	Total
£'000	£'000
2,000	16,164
	(158)
2,000	16,006
	(1,185)
2,000	14,821

Cash flow statement for year ended 31 March 2024

	Note	2023/24 £'000	2022/23 £'000
Cash flows from operating activities
Operating loss		(1,185)	(158)
Adjustments for:
- Depreciation and amortisation	3	646	627
- Increase in dilapidation provision	14	24	74
- (Increase)/decrease in trade and other debtors	9	2,438	(633)
- Increase/(decrease) in trade and other creditors	11 & 12	(4,107)	(869)
- Other non-cash adjustments	8	35	0
Net cash outflow from operations		(2,149)	(959)
Corporation tax paid		0	0
Total cash outflow from operating activities		(2,149)	(959)

Cash flows from investing activities
Purchase of tangible and intangible assets	7 & 8	(76)	(252)
Disposal of tangible and intangible assets	7 & 8	0	20
Total cash outflow from investing activities		(76)	(232)

Net decrease in cash and cash equivalents		(2,225)	(1,191)
Cash and cash equivalents at 1 April 2023	10	13,329	14,520
Cash and cash equivalents at 31 March 2024	10	11,104	13,329

29. Notes to the Financial Statements

1. Principal accounting policies

The Financial Reporting Council Limited (the FRC) is a company limited by guarantee, incorporated in the United Kingdom, and its registered office is 8th Floor, 125 London Wall, London, EC2Y 5AS. The company's registered number is 02486368.

The following principal accounting policies are those policies which have been applied consistently in dealing with transactions and balances that are considered material to the FRC Group.

a) Basis of preparation

On 7th February 2023, the prime minister announced a major machinery of government change which redistributed the activities of several existing government departments and created three new departments including the Department for Business and Trade (DBT). DBT was designated to the FRC with accounting officer responsibilities formally transferred from 1 April 2023.

These financial statements for the year ended 31 March 2024 are prepared in accordance with FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (FRS 102) and the requirements of the Companies Act 2006.

These financial statements are prepared under the historical cost convention.

b) Going concern

The Directors have performed a going concern review considering income and costs, and the Board is satisfied that the FRC will continue as a going concern for a period of not less than 12 months after the approval of these financial statements. Whilst performing its review, the Board was also cognisant that DBT has also provided a letter of financial support to the Directors, confirming that it will provide funding such that the Company can meet its liabilities as they fall due for a period of not less than 12 months from the date the financial statements are approved.

c) Significant accounting estimates, judgements and assumptions

The preparation of financial statements requires the use of estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Although these estimates and associated assumptions are based on historical experience and management's best knowledge of current events and actions, the actual results may ultimately differ from those estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis.

Provisions for dilapidations

The FRC has an obligation to make good the conditions of the premises at 125 London Wall in accordance with the lease agreement at the end of the lease term. Provisions for dilapidations is the area involving estimates and judgements where there is the greatest potential risk of a material adjustment in future years. The provision is expected to be utilised at the end of the lease.

A new lease was taken during the year at 10 South Colonnade, where part of the floorspace is being used for the UKEB office. In accordance with the lease agreement, the FRC is required to pay a proportion of any dilapidations sums payable under the lease. This is proportionate to the lease term and therefore, has been recognised on a straight-line basis.

Accounting estimate

The current provision is based on management's current best estimate of the future obligation and a valuation report provided by a third-party surveyor in 2024.

Accounting judgement

In making the estimate, management has exercised judgement about the likely future outcomes, including factors such as building and material costs. However, various factors and changes in circumstances could affect any amount payable in the future.

d) Presentation of financial statements

The presentational and functional currency is the British Pound Sterling.

e) Consolidation

The FRC has one subsidiary, UK Accounting Standards Endorsement Board Limited. The subsidiary has not traded during the year and has no assets or liabilities. Therefore, it is not material to the financial performance and position of the FRC. Consequently, no consolidated set of financial statements has been prepared.

f) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. The FRC has predominantly the following sources of revenue:
Revenue received from preparers, pension and insurance levies are voluntary contributions and are recognised on a cash basis.
The following revenue is received from participants to fund specific activities:
Revenue receivable from Recognised Supervisory Bodies (RSBs) for FRC activities as the UK Competent Authority for Audit is recognised on an accruals basis. More specifically, revenue receivable from RSBs in respect of Audit Quality Review, Audit Market Supervision and Audit Firm Supervision are recognised on the basis of costs incurred in each financial year and the difference between revenue received and revenue recognised is transferred to deferred income in the Balance Sheet.
Revenue receivable from various professional accounting bodies in respect of Accountancy disciplinary case costs and from RSB's in respect of enforcement case costs is recognised on the basis that costs incurred in each financial year are to be fully reimbursed.
Revenue receivable from the accountancy professional bodies, including that paid through the Consultative Committee of Accountancy Bodies (CCAB), and from the actuarial professional body or bodies, is based on non-statutory arrangements between those bodies, the FRC and government, and is recognised on an accruals' basis.
In addition, there are some other smaller sources of revenue as listed below:
Revenue in respect of publications of books, guidance and standards is recognised on sale of goods or delivery of services.
Revenue in respect of inspection income for third country audit, the National Audit Office, the Public Sector Audit Appointments and Crown Dependencies is recognised as the work is delivered and the other party is required to pay.
Revenue in respect of becoming the system leader for local audit is funded from the Department for Levelling Up, Housing and Communities (DLUHC) and is recognised as the work is delivered and the other party is required to pay.
Revenue in respect of the Company and Organisational Data Explorer (CODEX) project is funded by a grant via the Regulators' Pioneer Fund awarded by BEIS and delivered by the Department for Science, Innovation and Technology (DSIT). Income is recognised on a systematic basis over the periods necessary to match them with the related costs for which the grant is intended to compensate.
Revenue in respect of taxonomies development is recognised as costs are incurred and sponsors are satisfied that the project requirements have been met.

g) Tangible and intangible assets

Depreciation is provided on all property, plant and equipment, and amortisation is provided on all software at rates calculated to write off the cost, less estimated residual value (intangibles are assumed to have nil residual value), over their estimated expected useful lives on a straight-line basis, as follows:

Tangible assets
Office equipment	3 years
Fixtures, fittings and furniture	Lease term
Leasehold improvements	Lease term

Intangible assets
Capitalised software	3 years

h) Financial instruments

Financial assets and financial liabilities are recognised when the FRC becomes a party to the contractual provisions of the financial instrument.

Cash and cash equivalents

These comprise cash at bank.

Debtors

Debtors do not carry any interest and are stated at their nominal value. Appropriate allowances for estimated irrecoverable amounts are recognised in the Profit and Loss account when there is objective evidence that the asset is impaired.

As of 1 April 2023, a threshold of £1,000 was introduced for prepaid expenses, whereby if the prepaid amount is below this threshold, the cost is expensed directly to the Profit and Loss account.

Trade creditors

Trade creditors are not interest bearing and are stated at their nominal value.

i) Staff costs

Staff costs are recognised as expenses when the FRC becomes obligated to pay them. An accrual is made for any untaken employee annual leave as at year end using data from leave records.

j) Pension costs

The FRC operates a defined contribution scheme for its employees and recognises contributions payable as an expense in the year it is incurred. There is no further obligation once the contributions have been paid.

k) Deferred lease incentive

Deferred lease incentives are released on a straight-line basis over the term of the lease.

l) Provisions

A provision is recognised when there is a present obligation arising from a past event which can be reliably measured, and it is probable that an outflow of economic benefits will be required to settle the obligation. Where the time value of money is material, the provision is measured at present value using discount rates issued by HM Treasury.

m) Taxation

The FRC is subject to Corporation Tax only on its interest receivable income. There are no timing differences between the recognition of that income in the financial statements and the tax computation. Accordingly, there is no provision for deferred tax.

n) Case costs and financial sanctions

Case costs

The legal and professional costs of accountancy and actuarial disciplinary cases and Corporate Reporting Review cases incurred in the period are included in the financial statements on an accruals basis. Provision is made for the future costs of any disciplinary cases only where the contract is onerous, the costs are unavoidable, and they represent a present obligation at the Balance Sheet date.

Financial sanctions and cost awards receivable

Case costs awards receivable in respect of accountancy disciplinary cases, which are due to the relevant participant body under the Accountancy Scheme, are included in the income statement of the FRC, as a reduction to case costs incurred and associated revenue receivable. Fines received are not included in the financial statements as the FRC acts only as a mechanism whereby the fines are transferred from one party to another.

Fines receivable and case costs awards in respect of actuarial disciplinary cases are retained and included within revenue in the period in which the fines and case costs become due and collectable. Although the FRC aims to complete a case within two years, it is difficult to predict the amount of costs and fine awards during the year.

o) Components of equity

As set out in the Statement of Changes in Equity, equity comprises the general reserves (separating those that arose from actuarial activities) of the FRC and two costs funds.

General reserves

As the FRC is a public body, the use of cash represented by general reserves is subject to approval by the government.

Costs funds

The FRC has two costs funds: the Corporate Reporting Review Legal Costs Fund and the Actuarial Case Costs Fund.

Contributions have been received to enable the Conduct Committee to take steps to pursue compliance with certain requirements of the Companies Act 2006 and applicable accounting standards, and to investigate departures from those requirements and standards. Those funds may be used only for this purpose and may not be used to meet other costs incurred by the FRC. The FRC retains the Legal Costs Fund while it continues to be authorised by the Secretary of State for DBT for the purposes of section 456 of the Companies Act 2006.

The Legal Costs Fund is currently maintained at £2m. Where use is made of these funds in the year, the funds are replenished the following year from the levies. DBT has confirmed that if the Legal Costs Fund falls below £1m in any one year, it will make a grant to cover legal costs subsequently incurred in that year.

The Actuarial Case Costs Fund consists of contributions received from the Institute and Faculty of Actuaries, and through levies on pension schemes and insurance companies. The fund is used to fund investigations into potential misconduct by actuaries and any subsequent prosecutions.

2. Revenue

	2023/24	2022/23
	£'000	£'000
For core operating costs
Preparers levy	21,271	20,548
Insurance and pension levies	3,217	2,651
Accountancy professional bodies	13,800	11,500
Actuarial profession	237	230
Publications	665	725
Government (note 16)	182	28
Sub-total	39,372	35,682

For audit regulation
Accountancy professional bodies	16,217	13,496
NAO and Crown Dependencies	1,086	1,377
Local audit (DLUHC)	1,212	293
Third country audit	220	230
Sub-total	18,735	15,396

For accountancy disciplinary case costs
Accountancy professional bodies	7,650	6,733
Less cost awards recovered	(7,686)	(7,179)
Sub-total	(36)	(446)

For XBRL development
Various sponsors (note 16)	325	353
Sub-total	325	353
Total	58,396	50,985

3. Operating Expenses

	2023/24	2022/23
	£'000	£'000
Core operating costs
Core staff and related people costs (note 5)	48,059	40,956
IT and facility costs	5,749	4,583
Lease expense	983	945
Depreciation and amortisation costs	646	627
Auditor's remuneration:
- audit (incl. VAT)	95	89
- non-audit services	0	0
XBRL taxonomy development costs	325	353
Sub-total	55,857	47,553

Accountancy Disciplinary Case Costs
Accountancy professional bodies	7,650	6,733
Less cost awards recovered	(7,686)	(7,179)
Sub-total	(36)	(446)

Other operating expenses
Travel and conferences	601	413
Legal and professional fees	1,244	1,407
All other costs	1,915	2,216
Sub-total	3,760	4,036
Total operating expenses	59,581	51,143

4. Taxation

Corporation Tax at an effective rate of 25% (2022/23: 19%) on interest income of £0 (2022/23: £0).

Permanent staff:	2023/24	2022/23
	£'000	£'000
Salaries	40,660	34,466
Social security costs	4,784	4,284
Pension costs	4,197	3,472
Total permanent staff costs	49,641	42,222

Other people related costs:
Seconded staff and contractors	920	506
Fees paid to Board, committee and council members	878	911
Other costs	840	727
Total staff and related people costs	52,279	44,366
Staff costs transferred to cases	(4,220)	(3,410)
Total core staff and related people costs	48,059	40,956

Average permanent staff numbers by division:	2023/24	2022/23
CEO	30	27
Corporate Services	80	73
Enforcement	69	64
Regulatory Standards	78	72
Supervision	182	161
UK Endorsement Board	25	21
Total	464	418

Directors' emoluments	2023/24	2022/23
	£'000	£'000
Fees (included in staff costs)	561	604
Other pension costs	22	31
Sub-total (see page 86)	583	635
Social security costs	59	76
Total	642	711

6. Financial risk management

The FRC's operations expose it to some financial risks. Management continuously monitors these risks with a view to protecting the FRC against the potential adverse effects of these financial risks. There has been no significant change in these financial risks since the prior year.

Financial instruments

The FRC's basic financial instruments in both years comprise of cash in hand, debtors and creditors that arise directly from its operations. All FRC funds are kept in Government Banking Service (GBS) bank accounts that have been open since May 2019.

The financial instruments include surplus funds which, subject to DBT approval, will be used to fund future operating costs including case costs. The FRC has no long-term borrowings or other financial liabilities apart from creditors.

Credit risk

It is the FRC's policy to assess its debtors for recoverability on an individual basis and to make provisions when considered necessary. In assessing recoverability management takes into account any indicators of impairment up until the reporting date.

At 31 March 2024, all FRC cash was held within the GBS bank accounts, where funds are backed by His Majesty's Treasury (HMT).

Interest rate risk

Funds held in GBS bank accounts do not generate receivable interest but do incur bank charges for payment services.

Liquidity risk

The FRC maintains sufficient levels of cash and cash equivalents and manages its working capital by carefully reviewing forecasts on a regular basis to meet the requirements for its day-to-day operations.

7. Intangible assets

	Software
	£'000
Cost at 1 April 2023	161
Additions	0
Disposals	(95)
Cost at 31 March 2024	66
Amortisation at 1 April 2023	136
Disposals	(95)
Charge for year	21
Amortisation at 31 March 2024	62
Net book value at 31 March 2024	4
Net book value at 31 March 2023	25

8. Tangible assets

	Leasehold improvements £'000	Office equipment £'000	Fixtures, fittings and furniture £'000	Total £'000
Cost at 1 April 2023	2,467	1,031	1,137	4,635
Additions	0	76	0	76
Disposals	0	(115)	0	(115)
Non-cash adjustment	0	(35)	0	(35)
Cost at 31 March 2024	2,467	957	1,137	4,561
Depreciation at 1 April 2023	2,007	676	722	3,405
Disposals	0	(115)	0	(115)
Charge for year	230	186	209	625
Depreciation at 31 March 2024	2,237	747	931	3,915
Net book value at 31 March 2024	230	210	206	646
Net book value at 31 March 2023	460	355	415	1,230

9. Debtors

	2023/24	2022/23
	£'000	£'000
Trade debtors	4,269	3,055
Prepayments	1,761	2,012
Accrued income	2,304	2,250
Enforcement sanctions	524	3,980
Other debtors	8	7
Total	8,866	11,304

10. Cash and cash equivalents

	Cash 2024	Total 2024	Cash 2023	Total 2023
	£'000	£'000	£'000	£'000
Actuarial case costs fund	2,000	2,000	2,000	2,000
Corporate reporting review legal costs fund	2,000	2,000	2,000	2,000
General accounts	7,104	7,104	9,329	9,329
Totals at 31 March 2024	11,104	11,104	13,329	13,329

11. Creditors – amounts falling due within one year

	2023/24	2022/23
	£'000	£'000
Trade creditors	462	447
Other taxation and social security	1,504	1,374
Accruals	2,154	2,292
Deferred income	390	633
Deferred lease incentive	305	350
Enforcement fines and cost awards	524	3,980
Corporation tax	0	0
Other payables	31	54
Total	5,370	9,130

12. Creditors – amounts falling due after more than one year

	2023/24	2022/23
	£'000	£'000
Deferred lease incentive	0	347
Total	0	347

13. Significant transactions with other standard setters

With the agreement of HM Treasury, DBT and the FCA, the FRC has, since 2008, taken the responsibility for collecting the UK contribution to the IASB alongside its preparer's levy. The FRC makes a small charge for providing this service. The amount of monies raised during the year was £844,000 (2022/23: £915,000), of which £19,000 (2022/23: £16,000) remained to be paid over by the FRC to the IASB as at 31 March 2024.

14. Provisions for liabilities

	2023/24	2022/23
Leasehold improvements and dilapidations	£'000	£'000
Balance at 1 April 2023	405	331
Amount charged to profit and loss account	24	74
Balance at 31 March 2024	429	405
Current and Non-current	2023/24	2022/23
	£'000	£'000
Current	419	0
Non-current*	10	405
Balance at 31 March 2024	429	405

*New lease taken during the year at 10 South Colonnade.

15. Commitments

Total commitments for the FRC under operating leases relating to the leasehold property were as follows:

	2023/24	2022/23
	£'000	£'000
Payments due within one year	1,236	937
Payments due within two to five years	463	872
Payments due after more than five years	0	0
Total	1,699	1,809

Total commitments for the FRC under operating leases for office equipment were as follows:

	2023/24	2022/23
	£'000	£'000
Payments due within one year	2	2
Payments due within two to five years	0	2
Payments due after more than five years	0	0
Total	2	4

The FRC is an executive non-departmental public body of DBT. DBT is therefore regarded as a related party. During 2023/24, DBT provided £32,800 (2022/23: £28,000) of funding towards the Recognition Arrangements Grant Programme and Companies House (an Executive Agency of DBT) contributed £123,000 (2022/23: £137,000) towards the XBRL Taxonomies project.

There were no related party transactions undertaken by key management personnel with the FRC during the year.

Total key management personnel compensation	2023/24	2022/23
	£'000	£'000
Fees and staff costs	1,816	1,814
Other pension costs	97	102
Sub-total	1,913	1,916
Social security costs	184	196
Total	2,097	2,112

17. Subsidiary undertaking

The FRC has one subsidiary undertaking, UK Accounting Standards Endorsement Board Limited. It is a company limited by guarantee of which the FRC is the sole member. Its registered office is 8th Floor 125 London Wall, London, United Kingdom, EC2Y 5AS. It did not trade during the reporting period.

18. Liability of members

The members of the FRC have undertaken to contribute a sum not exceeding £1 each to meet the liabilities of the Company if it should be wound up.

19. Controlling party

The ultimate controlling party of the Financial Reporting Council Limited is the Secretary of State for the Department for Business and Trade.

The financial statements for the FRC were prepared by the FRC and may be obtained from its registered address: 8th floor, 125 London Wall, London, EC2Y 5AS.

20. Contingent liabilities

As a result of a third-party assessment of the dilapidations liability at 125 London Wall conducted in March 2024, there is a potential residual claim of £82,000 if the refurbishment of the building proceeds. However, this has not been recognised as a liability in the Balance Sheet.

The FRC does not accept any liability to any party for any loss, damage or costs, however arising, whether directly or indirectly, whether in contract, tort or otherwise from action or decision taken (or not taken) as a result of any person relying on or otherwise using this document or arising from any omission from it.

© The Financial Reporting Council Limited 2024 The Financial Reporting Council Limited is a company limited by guarantee. Registered in England number 02486368. Registered Office: 8th Floor, 125 London Wall, London, EC2Y 5AS

Financial Reporting Council 8th Floor 125 London Wall London, EC2Y 5AS

+44 (0)20 7492 2300 www.frc.org.uk

This is Life Assurance and Group Income Protection Insurance. ↩↩
This is a payment to a defined contribution scheme. ↩↩
Executive Directors are entitled to receive some other benefits in accordance with the remuneration framework; the benefits vary depending on when their employment with the FRC started. The figures shown are the cash equivalent of their full pay and benefits. ↩↩↩
Sarah Rapson received an enhance remuneration during her tenure as the Accounting Officer. The figure shown is the cash equivalent of the full pay, benefits, Employer pension and social security. ↩↩
Executive Directors' remuneration in 2023/24 amounted to 1.2% (2022/23: 1.6%) of total company remuneration. ↩↩
Although all effort is made to meet the KPI we are also mindful of not prematurely closing cases until we are satisfied the issues have been rectified and embedded. The average time to conclude a case was 13 months. ↩
The Enforcement KPIs are: * A period of two years between the notification of the commencement of the investigation and service of either the Proposed Formal Complaint, Investigation Report (or closure or settlement if sooner) in 50% of cases in a financial reporting period (1 April to 31 March). * A period of three years between the notification of the commencement of investigation and service of either the Proposed Formal Complaint (PFC), Investigation Report (IR) (or closure or settlement if sooner) in 80% of cases in a financial reporting period (1 April to 31 March). ↩↩
The headcount target of 533 for 2023/24 is a revised figure. The recruitment to facilitate the transition to ARGA was paused, leading to a change in the growth plan. ↩
The first and major investigation related to the statutory audit of the financial statements of Carillion for the financial years ended 31 December 2014, 2015, and 2016, and additional audit work in 2017. The second investigation concerned the statutory audit of certain transactions relating to the financial statements of Carillion for the financial year ended 31 December 2013. ↩
The chair of the Board joined the Committee following the resignation of Sir Ashley Fox, while the recruitment for his replacement takes place. ↩