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Audit and Risk Committee Terms of reference

1. Role and responsibilities

1.1The Audit and Risk Committee (Committee), a governance committee of the FRC's Board (Board), has the following roles and responsibilities:

  1. the maintenance of appropriate and adequate audit processes and the governance of the FRC's internal and external audit programme.
  2. oversight of the FRC's:
    1. financial reporting process;
    2. use of public funds;
    3. corporate governance;
    4. system of internal controls;
    5. identification and management of significant risks; and
    6. compliance with laws and regulations.
  3. the provision of support and advice to the FRC's Chief Executive and Accounting Officer (CEO) and Board on the matters within the Committee's remit.
  4. the matters set out in the schedule to these terms of reference.

1.2In addition to these terms of reference, members of the Committee must adhere to the General Committee Terms contained in the FRC Governance Handbook.

2. Membership

2.1At least one member of the Committee shall have recent and relevant financial experience.

2.2All members of the Committee are expected to have and maintain a good understanding of:

  1. financial matters; and
  2. accepted good practice in the areas of risk and controls.

2.3The Committee, collectively, shall have a good range of skills and competence in the areas of accounting, audit, risk management, financial governance and technical issues, as relevant to the FRC.

3. Meetings

3.1The Committee shall meet at least four times per year.

Schedule of responsibilities and delegated tasks

No. Responsibility
1. Financial Reporting
1.1Review the integrity of the FRC's financial statements, including its annual report and any other formal announcement relating to its financial performance.
1.2Report to the Board on significant financial reporting issues and judgments, having regard to the matters communicated to it by the auditors.
1.3Review and advise the Board and the CEO on standards and propriety in the FRC and the FRC's achievement of value for money, in line with the principles of Managing Public Money.
1.4Recommend to the Board any significant changes in accounting policies or practices.
1.5Review and (where necessary) challenge:
  1. assurances about the financial systems which provide the figures for the accounts and the quality of controls over the preparation of accounts;
  2. the consistency of, and any changes to, accounting policies both on a year-on-year basis and across the FRC;
  3. the methods used to account for significant or unusual transactions where different approaches are possible;
  4. whether the FRC has adopted appropriate accounting policies and made appropriate estimates and judgments, taking into account the views of the external auditor;
  5. all material information presented with the financial statements including the strategic report; and
  6. the appropriateness of the going concern basis of accounting and the disclosure of any related uncertainties.
2. Narrative Reporting
2.1The Committee shall review the content of the annual report and accounts and advise the Board in respect of whether the Committee considers that, taken as a whole:
  1. it is fair, balanced and understandable; and
  2. provides the information necessary for the members of the FRC and the FRC's stakeholders to assess its performance, business model and strategy.
3. Internal audit
3.1Approve the appointment, re-appointment and/or removal of:
  1. the Head of Internal Audit, if the function is in-house; or
  2. the entity carrying out the internal audit function (the "internal auditor"), if outsourced.
3.2Ensure the FRC's internal audit function has adequate resources and appropriate access to information to enable it to perform its function effectively and in accordance with the relevant professional standards.
3.3Annually approve the internal audit programme, including the budget for it.
3.4Consider the major findings of internal audit reviews and review and monitor the adequacy of management's response to the findings. Where accepted by management, ensure internal audit review recommendations are implemented.
3.5Periodically monitor and review the independence and effectiveness of the FRC's internal audit function.
3.6Meet with the Head of the FRC's internal audit function at least once in each year, without any members of staff present, to discuss the internal audit remit and any issues arising from the internal audits carried out.
3.7Ensure the Head of the FRC's internal audit function has a right of direct and confidential access to the Chair of the Board, CEO and Chair of the Committee.
3.8Approve the Memorandum of Understanding & Audit Charter of the FRC's Internal Audit function.
3.9Approve the remuneration for the FRC's internal audit function including ensuring that fees are appropriate to enable an adequate internal audit to be conducted.
4. Internal controls, risk management systems and governance
4.1Keep under review the effectiveness of the FRC's internal control and risk management systems, including the financial controls, and report to the Board at least on an annual basis.
4.2In relation to risk management, review:
  1. the FRC's Risk Register and, specifically, the current risks to the FRC, the risks to its strategy and objectives, management and mitigation of those risks;
  2. the FRC's capability to identify and manage new risks; and
  3. reports on any material breaches of risk limits and the adequacy of proposed action.
4.3Receive an annual report from the internal auditor, including their opinion of the FRC's risk management and internal control framework, summarising the work performed, key issues emerging, management responses to audit recommendations and any resourcing issues affecting the delivery of the objectives of the internal audit.
4.4Provide assurance to the Board on the disclosures included in the annual report in relation to internal control and risk management.
4.5Provide the Board with advice on the continued appropriateness of the risk management approach and risk appetite in light of the FRC's purpose, values, corporate strategy and strategic objectives.
4.6Annually review and recommend proposed material changes to the FRC's risk management framework for the Board's consideration and approval.
4.7Promptly notify the Board and CEO of actual or likely material breaches of risk appetite.
4.8Challenge whether executive management has a sound understanding of the FRC's principal and emerging risks.
5. External audit
5.1Make recommendations to the Board in relation to the appointment, re-appointment and/or removal of the FRC's external auditor.
5.2If either the internal or external auditor resigns, investigate the issues leading to this and decide whether any action is required.
5.3Oversee the relationship with the external auditor, on behalf of the Board, including (but not limited to):
  1. approving their remuneration for audit services and ensuring that the level of fees is appropriate to enable an adequate audit to be conducted;
  2. approving the external auditors' terms of engagement, including any engagement letter issued at the start of each audit and the scope of the audit;
  3. assessing annually the independence and objectivity of the external auditor, taking into account relevant professional and regulatory requirements and the relationship with the external auditor as a whole;
  4. satisfying itself that there are no conflicts of interest arising between the external auditor and the FRC or its staff;
  5. assessing annually the effectiveness of the audit process, which shall include a report from the external auditor on their own internal quality procedures; and
  6. seeking to ensure co-ordination with the activities of the internal audit function.
5.4Review and approve the annual external audit plan, including the budget, and ensure that it is consistent with the scope of the audit engagement.
5.5Review the findings of the audit with the external auditor, including but not limited to:
  1. any major issues which arose during the audit;
  2. any accounting and audit judgments;
  3. levels of errors identified during the audit; and
  4. the effectiveness of the audit.
5.6Review the management letter responding to the external auditor's findings and recommendations.
5.7Ensure that the external auditor is not engaged to provide any non-audit services and that any audit-related services are provided in a manner consistent with the FRC's own guidance and applicable standards.
5.8Ensure that external auditor rotation and/or re-tendering is undertaken in a manner consistent with the FRC's own guidance and applicable standards.
5.9Meet with the external auditor at least once a year, without staff present, to discuss the external auditor's remit and any issues arising from the audit.
5.10Oversee the coordination of the internal and external auditors.
6. Whistleblowing and fraud
6.1Review the FRC's arrangements in relation to possible improprieties in financial reporting and/or whistleblowing matters; and approve updates to the whistleblowing policy.
6.2Review the FRC's procedures for detecting, responding to and preventing fraud and acts of bribery, including reviewing the management of these risks and any non-compliance.
7. UKEB responsibilities
7.1Review and approve the FRC's annual UK Endorsement Board Public Oversight Report to the Secretary of State noting that, where any oversight recommendations are to be made these are to be approved by the Board.
8. Reporting Responsibilities
8.1Report on any unresolved issues between the Board and/or the CEO and the Committee in the Annual Report.
8.2Review the Annual Compliance Report which sets out the FRC's annual compliance with its key legal, regulatory, contractual and policy obligations.

Approved by the Board with effect from 1 November 2025

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Name Audit and Risk Committee Terms of reference
Publication date 31 October 2025
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