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FRC 3-Year Strategy: 2025-28
The FRC does not accept any liability to any party for any loss, damage or costs howsoever arising, whether directly or indirectly, whether in contract, tort or otherwise from any action or decision taken (or not taken) as a result of any person relying on or otherwise using this document or arising from an omission from it.
© The Financial Reporting Council Limited 2025 The Financial Reporting Council Limited is a company limited by guarantee. Registered in England number 2486368. Registered Office: 13th Floor, 1 Harbour Exchange Square, London E14 9GE
1. Strategy on a page
The purpose of the FRC is to serve the public interest and support UK economic growth by upholding high standards of corporate governance, corporate reporting, audit and actuarial work
Objective 1
The standards and expectations we set will enhance corporate governance, corporate reporting and investor stewardship in a manner that supports UK economic growth and investment.
Objective 2
Our proportionate regulation of accounting, audit, assurance and actuarial work will expect and encourage high quality by those responsible, acting as an improvement regulator and dealing effectively and fairly with cases where there are significant or serious shortcomings.
Objective 3
We will build on our deep understanding of corporate reporting and the audit and actuarial markets we oversee, and by being agile, we will identify and prepare for opportunities and challenges on the horizon.
Objective 4
We will be a modern organisation, continuously learning, improving, and considered by others as a respected, effective and highly engaged regulator and by our colleagues as an inclusive and great place to work.
The Four Faces
System Partner Educating, collaborating and supporting continuous improvement
Supervisor Supervision and monitoring of requirements, culture and behaviours
Facilitator Encouraging good practice through structured engagement
Investigator and Enforcer Investigating and enforcing conduct and applying proportionate sanctions and directions
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.
Independent
Our people challenge ideas, make evidence-based decisions and always act with integrity.
Effective
Our people are decisive, accountable and collaborative when working with others to share information and experiences to improve outcomes.
2. Overview
We have updated our organisation's purpose
Everything the FRC does is framed in terms of pursuing its purpose. It describes what we are ultimately trying to achieve and offers us a strategic guide for our decision-making, priority-setting and resource allocation.
The purpose of the FRC is to serve the public interest and support UK economic growth by upholding high standards of corporate governance, corporate reporting, audit and actuarial work.
We have made three changes to our previously stated purpose:
- To reflect better the increased focus the government has placed on regulators supporting economic growth. This is something that was previously implicit in the FRC's purpose, but we consider it is appropriate to make this link explicit.
- In a similar vein, we have also used this update to make explicit the breadth of our remit across professions, which includes actuaries in addition to auditors and accountants.
- We have removed the previous reference in our purpose to 'holding to account those responsible for delivering high standards of governance, financial reporting and audit' owing to it being part of ‘how' we achieve our purpose rather than it being viewed as an 'end' in itself.
Why our purpose matters
The FRC's work helps underpin trust and confidence in companies from a range of their stakeholders, such as investors, creditors and employees and the communities in which they operate. This enables companies to attract the investment as well as the broader support they need to grow and prosper in the long term. Therefore, the FRC's work contributes directly to UK economic growth while, in turn, protecting the public interest of those stakeholders who rely on good quality corporate reporting and audit to support their own informed decision-making and/or financial interests.
Poor quality governance, corporate reporting, audit and actuarial work can contribute to misinformed decision-making, disorderly corporate failure and avoidable costs for a range of stakeholders. Those affected include investors, creditors, employees and pensioners, in addition to broader impacts on supply chains and local communities. It is important to stress, however, that a growing, vibrant and innovative economy demands market entry and exit driven by risk-taking with capital. It has never been the FRC's role to prevent corporate failure and market exit.
We recognise that the sectors we regulate include corporates, audit firms and investors that operate on an international rather than national basis. By engaging with international peers and standard-setting authorities, the FRC influences international standards for the benefit of UK stakeholders.
Our core values will shape how we deliver our purpose, with an added emphasis in the 2025-28 strategy on improvement, proportionality and engagement – Sir Jan du Plessis, Chair
Our values are the basis for how we undertake our work over the life of this strategy. We have embedded four core values for some time: we want to be respected for being effective, influential, fair and independent.
Three aspects of these values have added salience for our 2025-28 strategy. We intend these emphases to be noticed by our stakeholders over this period in their experience of the FRC and the influence of our work:
An important part of being effective is that our work encourages those we regulate to improve, learn and develop their own culture of performing to high standards. To do this, regulation must offer more than setting standards, monitoring performance and holding those responsible to account. It should also help foster the right behaviours and cultures where those responsible proactively take accountability for their own improvement in the public interest.
An important part of being fair is ensuring that we continue to embed the principle of proportionality in our work. To do this, our requirements and interventions should be justified as appropriate, targeted and no more than necessary.
An important part of being influential is to ensure that we seek to engage well with all stakeholders who have an interest in our work. Engagement is more than consultation. It requires us to reach out, be accessible, listen and be empathic while objectively pursuing our regulatory objectives.
There are some important differences stakeholders can expect with our 2025-28 strategy that build on the progress we have made in recent years – Richard Moriarty, CEO
We will continue to embed our growth duty across all our work through priorities that are aligned to our strategic objectives. A key ambition for us is that our Codes, like the UK Corporate Governance Code and investor Stewardship Code, are valued as global benchmarks for encouraging high standards, while also being respected as proportionate and flexible in accommodating a broad range of business models and minimising unnecessary burdens.
Our five priorities to support economic growth as outlined to the government are also relevant:
- Underpin investor and broader confidence in UK plc, which enables businesses to attract capital and grow.
- Embed the principle of proportionality in our work and identify and address unnecessary burdens on business.
- Understand the markets we oversee to identify whether they work effectively to support growth.
- Identify key future trends and innovations in the markets we oversee that businesses and regulators should be well positioned for.
- Work with others to support the future skills and resilience of the professions needed for the markets we oversee.
We have the same ambition for the important work we do on setting auditing, actuarial and accounting standards. This will influence our work with the international standard-setting and regulatory bodies, as well as our development of minimum standards for audit committees.
We want the whole audit market to work more effectively for those who rely on it. To pursue this ambition, our regulation of the Public Interest Entity (PIE) audit market should be valued for encouraging improvement and high-quality standards across all firms that undertake this important work.
We will undertake a comprehensive review of how the Audit Supervision regulatory model should evolve to respond to challenges and emerging issues in the UK audit market, reduce unnecessary regulatory burdens and develop a more agile and adaptable approach. Overall audit quality has improved, especially at the largest firms, but the UK audit landscape is evolving, and our approach must adapt for 2028 and beyond. The new model which we plan to implement in 2026/2027 will include consideration of opportunities presented by the introduction of the new standard of quality management (ISQM1). This builds on our success in embedding, for the largest firms, our governance requirements, which request operational separation between the audit and advisory businesses to increase their focus on audit quality.
As of 12 February 2025, we have transferred system leadership responsibilities back to the Ministry of Housing, Communities and Local Government ahead of the formation of the new Local Audit Office. We remain committed to our regulatory role within the local audit system and we will continue to support improvements through our regulatory involvement.
We will continue to drive the enhancements in audit quality that are needed across the broader PIE market, so high audit quality is not just expected of the largest firms. We will also ensure that the performance standards we expect for smaller firms carrying out PIE audits are appropriate and proportionate. We will invest more in our Scalebox initiative to help smaller firms to develop capabilities that support their ability that provide more choice in the PIE market.
Outside the PIE audit market, we will continue to independently oversee how effectively the various professional bodies undertake their regulatory roles for the non-PIE audit sector that we have delegated to them. We will also review how the audit market works for small and medium-sized enterprises (SMEs), including how audit standards can be proportionately applied to SMEs.
We want to ensure that there continues to be public trust and confidence in audit more broadly and that where there are concerns about potentially serious or significant failures, we have effective, proportionate and efficient ways of investigating these and holding those responsible to account, including through the publication of outcomes. We want to share learnings to explain and improve required behaviours. In year one of this strategy we will review and consult on our end-to-end governance model for initial case assessment, the opening and conduct of investigations and publication of outcomes. This includes considering whether we can develop a broader and more graduated set of options for routes to resolution that can be used for investigations, depending on the circumstances.
We want to ensure that the FRC is valued as an effective, proportionate and engaged independent regulator of public interest actuarial work. The quality and integrity of this work is vitally important to people's pensions, insurance products and the economy more generally. Although the FRC has traditionally been seen more as the home for independent audit and accountancy regulation, we are as keen to be respected for the analogous work we do on supporting good quality actuarial work.
Our ambition is to be valued as a modern and agile regulator that is respected for the effectiveness of its regulation today, but is also highly relevant for proactively addressing the challenges and opportunities of the future. Several big ticket items are on our agenda for 2025-28, such as Artificial Intelligence (AI) and technology, sustainability reporting and assurance, private capital participation in audit firm ownership, and the future resilience of the profession and skills required. We will invest more in our Sandbox initiative to develop innovative approaches to problem solving.
We very much welcome the government's commitment in the King's Speech to bring forward draft legislation to reform and modernise the FRC's statutory authorities, powers and regulatory perimeter. This change will help us more effectively meet our purpose and ensure our regulatory perimeter is more relevant to how corporate UK works today. Subject to Parliamentary approval, by the end of this 2025-28 strategy the legislative reform and transition to ARGA should hopefully be a reality.
We are keen to work with stakeholders in advance of this to ensure we give clarity to how we will operate under the new regime. We expect our values will continue to shape how we go about our work, because how regulation is delivered is as important as what it delivers. Our ambition is that we are respected by our stakeholders as an organisation that embeds and lives our values, has the humility and courage to learn and adapt, and ultimately delivers in a demonstrable way on our purpose to serve the public interest and support UK economic growth.
3. Our strategic objectives – 2025-28
Our expected operating environment over the period 2025-28 will demand from us the pursuit of the following four strategic objectives. We have published separately a table of activities linking these objectives to our annual plan.
Objective 1
The standards and expectations we set will enhance corporate governance, corporate reporting and investor stewardship in a manner that supports UK economic growth and investment.
Objective 2
Our proportionate regulation of accounting, audit, assurance and actuarial work will expect and encourage high quality by those responsible, acting as an improvement regulator and dealing effectively and fairly with cases where there are significant or serious shortcomings.
Objective 3
We will build on our deep understanding of corporate reporting and the audit and actuarial markets we oversee, and by being agile, we will identify and prepare for opportunities and challenges on the horizon.
Objective 4
We will be a modern organisation – continuously learning, improving, and considered by others as a respected, effective and highly engaged regulator and by our colleagues as an inclusive and great place to work.
How our expected operating environment in 2025-28 influences our four strategic objectives
1. Standards and expectations
The UK's reputation for high standards of governance, corporate reporting and investor stewardship has been widely credited as a source of competitive advantage for international investment. The challenge for the FRC is to strike an appropriate balance between two things. Firstly, enhancing the quality of corporate information, which benefits users and the preparers of this information if it offers them better access to capital to grow. Secondly, avoiding unnecessary burdens and costs while doing so.
Our support for the government's growth mission has sharpened our focus on proportionality to ensure that any additional requirements are well designed, targeted and no more than necessary. This is in addition to reviewing existing
requirements or guidance to determine whether it can be withdrawn or reduced. The FRC has been operating in this way over the past year. For example, this approach lay behind our conclusion, in early 2024, of the largest ever consultation on the UK Corporate Governance Code and our current consultation on the Stewardship Code that relates to asset owners, asset managers and investment service providers.
We expect this central theme will endure over the period 2025-28. This approach will also influence our engagement with the various international standard-setting organisations and with other audit regulators around the world, including through our work with the Independent Forum of Independent Audit Regulators.
2. Audit, assurance and actuarial regulation
The health of the UK economy needs to be underpinned by a robust and well-functioning audit market that is supported by appropriate levels of audit quality that instil trust and confidence in users of financial statements. This is a strong platform on which to build and is a shared vision with firms, professional bodies and investors.
The landscape of our operating environment has developed since the recommendations of Sir John Kingman's 2018 review into the audit market and our organisation. We have significantly changed our approach to regulation and our operating model, and we have embedded the recommendations that were directed towards us in the Kingman review.
Audit quality has improved in recent years, as firms have invested in people and quality management systems. We undertook a survey of audit professionals this year that shows that they view improvements they have made, such as a focus within firm culture on quality, and our independent oversight regulation as having had a significant impact on enhancing quality.
For our 2025-28 activity we think two issues are especially relevant:
- First, there continues to be a challenge in the delivery of audits of consistent quality across the whole of the PIE market. The FRC does not doubt the commitment of firms to quality, and some have made substantial investments. However, in our most recent annual assessments the quality gap between the largest firms and others had widened, not narrowed. We cannot be satisfied that audit quality in the PIE market is consistent across all those firms that undertake this important work and addressing this must be a focus in 2025-28.
- Second, for all firms, regardless of size, there cannot be any room for complacency. A focus on quality requires constant vigilance and rigorous attention by firms. New risks and challenges also emerge, which require a forward-looking and risk-based approach. The largest firms, which have in recent years enhanced their audit quality, cannot rest on the laurels.
Going forward, we think this context calls for us to adopt a multi-faceted approach, reinforced by our resolve in being an improvement regulator. This is captured in our 'four faces' approach to regulation.
An important role within our four faces approach is for the FRC to expect and encourage high standards, and our focus will continue to be on audit quality and underpinning the trust and confidence of those who rely on corporate reporting. We have chosen to use the term corporate reporting throughout this strategy (rather than financial reporting) to reflect the changing nature of the reporting landscape and our remit. As we evolve our supervisory approach, there will continue to be a need for robust inspection and for the FRC to shine a light on, and report on, the performance of firms for public and investor interest. However, we will also increasingly leverage the tools that already exist to enable firms to take greater ownership and accountability of their continuous improvement journey, such as their own systems of quality control and assurance (ISQM1), which recently came into effect. This builds on our recent work embedding governance changes, such as operational separation between the audit and advisory businesses and independent non-executive roles.
Another aspect of the four faces approach to regulation is that where there are significant or serious shortcomings we investigate and hold those responsible to account. Notwithstanding the work we will do to review our end-to-end approach to investigations and enforcement (from identification of matters meriting investigation through to publication of outcomes), the clear public expectation is that enforcement will remain an important part of our regulatory toolkit. Timeliness at all stages of the process is a key feature of our E2E project, as is the publications process.
In addition to a focus on quality, we think the expected market dynamics call for us to have a focus on how well the PIE audit market is working for choice and availability.
The PIE audit market has grown significantly since 2019, with increased revenues and auditor numbers. There are various reasons for the increase in fees charged including the need to meet new accounting and auditing standards, fund investments in technology and quality management systems, and hire expert skills.
The UK audit market remains dominated by the largest four firms, which retain a significant presence in FTSE 350 and FTSE 100 audits, although other firms have made some limited progress in terms of market share. Smaller PIE firms have grown and expanded using differentiated strategies, but even the largest continue to face challenges competing head on with the big four owing to their scale, deeper pools of expertise and access to investment. This market dynamic is not just a UK phenomenon, it is replicated in audit markets across the world.
Consistent with our four faces approach, we will continue to encourage capacity building by the smaller PIE firms. To support this, we will continue to invest in the FRC's Scalebox initiative for the 2025-28 period. This provides smaller firms with best practice and guidance for undertaking PIE audits. In addition, we will continue working to shape market practice through our thought leadership, aided by insights from market studies.
We also want to gain a better understanding of how the audit market works for SMEs and whether there is anything in how audit standards are interpreted and applied in practice that could lead to disproportionate costs and a lack of choice.
We anticipate that forthcoming legislation will place our actuarial regulation responsibilities on a firmer footing, allowing us to work with the government and the Institute and Faculty of Actuaries to define a risk-based and proportionate framework for the regulation of public interest actuarial work. This change will recognise the importance of quality actuarial work to the public interest and the UK's future economic growth. Private sector Defined Benefit (DB) pension schemes manage approximately £1.4 trillion1 of assets and have significant potential to support economic growth through greater investment in the productive economy. In setting well-balanced, proportionate and targeted requirements in relation to the actuarial advice supplied on the use of DB pension scheme surplus, we promote trust and confidence in the DB sector.
3. Agile regulation
Anticipating market trends and preparing for future opportunities and challenges requires a deep understanding of the markets we oversee. This understanding enables us to adapt our policies to align with the needs of a changing market. By actively monitoring trends and challenges, the FRC is better equipped to respond to emerging risks and opportunities, ensuring that the regulatory environment remains relevant and continues to support economic growth and investment.
This strategy is a forward look focused on solving the regulatory issues of now and the future rather than on the perceived problems of the past. There are a range of key developments on the horizon we think are relevant to our 2025-28 strategy:
- A continued focus on supporting UK economic growth. We have been subject to a Growth Duty since 2015. The new government has expressed its commitment to ensuring regulation supports growth and, as set out in our most recent remit letter, that the FRC should pursue high standards while taking growth into account.
- The impact of AI, technology and digital reporting on the markets and firms we oversee, as well as on our own operations.
- The development of sustainability reporting standards for UK businesses and the associated market for sustainability assurance.
- The growing interest from private capital in taking a greater participation in the UK audit market.
- The resilience of the audit profession in terms of ensuring there is a vibrant pipeline of future talented professionals with the appropriate skills and attributes, as well as retaining committed and expert professionals in their later career.
4. Modern organisation
We want to earn respect for being among the best-in-class regulatory authorities and we think good stakeholder engagement is central to this. The nature of regulatory decision-making means it is not always possible to agree, not least because different stakeholders may hold opposing views on some matters. Nevertheless, we believe that by engaging with stakeholders we are better able to develop effective, pragmatic and proportionate policies that serve the public interest and support UK economic growth. Having heard from stakeholders that they value the approach we have taken in recent months in which we undertake informal outreach ahead of formal consultation, we will continue to deploy this approach going forward.
One way we can learn and support those we regulate to adapt to these changing trends is through our Sandbox. To date, the Sandbox has focused only on audit and assurance. It has had success in several areas and resulted in valuable outputs such as additional guidance on the Objective and Reasonable Informed Third Party test and support to clear the local audit backlog. Building on this success we will expand the Sandbox to all areas of our remit, focusing on practical, innovative solutions which address the key themes stakeholders are most interested in and which are most likely to have an impact on UK growth and competitiveness.
To be successful we need to be able to recruit and retain the necessary skills to support our strategy and continue to promote an inclusive and diverse organisation. We will need to invest in our people through learning and development and by developing a new approach to performance management. We want a step change in this period in how we use and exploit technology, data and information management within our organisation.
Over the course of our 2025-28 strategy, we will develop our dual-hub operation and expand our new Birmingham office with a recruitment policy that skews towards this. We will also move from our current City of London office to a new office in the Canary Wharf area. More generally, during the life of this strategy, we will deploy our resources mindfully in the way we believe will best deliver the strategic priorities most relevant to each annual plan period.
Finally, to be effective we need a modernised set of statutory authorities and powers. John Kingman's 2018 review shone a light on the serious gaps within our current authorities and remit. We welcome the government's commitment in the July 2024 King's Speech and we will work with DBT as they bring forward draft legislation for pre-legislative scrutiny. Our strategy has been developed to remain relevant regardless of the timing of legislation.
Link between this strategy and our Annual Plans and Budgets
The strategy sets a course for the focus of our work for the years 2025-28. Each year of this strategy we will issue an annual plan and budget that sets out in more detail our work plan and our operational performance measures for the year. Although this is a strategy for three years, the landscape can change quickly in unexpected ways and we may refresh the strategy further during this period. If so, we would expect to consider this as part of our annual planning cycle.
4. Public interest outcomes
In addition to us prioritising our work to pursue our four strategic objectives, we are keen to understand how we might measure success in terms of outcomes that relate to the public interest.
We recognise that the governance, corporate reporting, audit and actuarial ecosystem is influenced by many factors, including the general health of the UK and global economy. Therefore, it is not always possible for us to separate and quantify the direct impact of our activities on this ecosystem. Nevertheless, we do not believe this should prevent us from being clear about what it is we would like to see achieved. With this in mind, we have developed five public interest outcomes or ambitions against which we would like to make progress in the period 2025-28.
- We want the UK's governance and stewardship frameworks to be clear and well understood by all those who use them and internationally recognised as a model that drives board and investor behaviours and leads to proportionate, principles-based and effective reporting. For those who report against these frameworks, we want to maintain a high standard of reporting that offers real insight that is helpful to users, enabling a flexible approach, and seeks to avoid encouraging mechanistic or ‘tick-box' reporting.
- We want UK corporate reporting to be consistently clear, concise and compliant with the relevant reporting requirements and for this to continue to improve over time. We want participants in the corporate reporting ecosystem to find practical use in our publications. We want them to be able to understand what is expected of them to meet requirements to a minimum standard and, if they aspire to exceed these minimum standards, access helpful guidance on good practice.
- We want the UK's audit and assurance market to be well-functioning. This means having a healthy range of resilient audit and assurance providers in the market. It also means that users can access audit and assurance services of a consistently high standard of quality, and that they understand how regulation impacts them and how we define and assess quality. These characteristics are as relevant to the local audit system as they are to the corporate audit system. Practitioners should be able to understand how they can scale the appropriate standards framework to provide a proportionate yet high-quality audit or assurance engagement.
- We want the audit and actuarial professions we regulate to be resilient and recognised globally as representing high standards of ethics and professionalism. This means expecting the professional bodies and firms to rise to this challenge, as well as understanding how our own work impacts the resilience of these professions and their ability to maintain fulfilling lifelong career paths, from students through to the most senior levels.
- We want all those we regulate to understand where, when and how they may be held accountable for failing to meet regulatory requirements and what will happen if they do. This means maintaining proportionate accountability regimes, acting swiftly where there are public interest concerns.
Market Health Indicators
We note the government's recent action plan announcement which stated that they will strengthen the model of accountability with formal performance reviews undertaken by sponsoring departments and we will work with DBT on what this looks like for the FRC in terms of these Market Health Indicators (MHIs) and our operating performance measures.
We will track the indicators we feel best represent the overall health of the governance, reporting, audit and actuarial ecosystem. Many of these are system-level indicators that can be affected by elements outside our control, such as government policy, geopolitical risk and overall business sentiment. These system-level indicators tell us something about the overall 'temperature' of the external environment in which we are operating. With these, we are not expecting to influence them or seek a trend or target; we will only monitor them to help inform our activities. We will look at trends in PIE corporate insolvencies, audit fees, private capital investment activity and FTSE 350/PIE audit market share and switching activity.
The other indicators are those we feel are more directly connected to our work in some way. Over the life of this strategy we will report on these MHIs, refining them as we learn more.
- Accounts restatements due to error and Corporate Reporting Review significant findings and substantive questions raised – indicators of how well reporting requirements are understood and potential stresses on finance and/or audit team resourcing and reporting.
- Stewardship Code signatory status – measuring the extent to which signatory status is highly regarded and routinely asked for in investment management requests for proposals.
- Firm-level Audit Quality Indicators (AQIs) – these are measures we encourage firms and audit committee chairs to use in their engagement and dialogue on quality2. AQIs cover firms' own governance, performance reporting, external and internal quality inspection results, and resource management including attrition.
- Number of accountancy and audit students – an indicator of the attractiveness of the profession and health of the pipeline of future professionals.
- Number of Responsible Individuals – an indicator of audit capacity.
- Audit firm survey perceptions – an indicator of how well firms' quality culture initiatives are embedded.
- PIE auditor registration metrics – number of PIE audit firms, RIs and other metrics developed in discussion with stakeholders. An indicator of market confidence.
- Stakeholder perceptions and engagement – an indicator of stakeholder sentiment on regulation and the role of the regulator.
- Behavioural changes resulting from regulatory activity – including unprompted remediation work, voluntary self-reporting of breaches and the delivery of agreed improvement plans. These are indicators of how well our enforcement regime is encouraging self-awareness, holistic improvements and cultural change.
Financial Reporting Council
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