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Report of the Independent Supervisor on Auditors General Pursuant to Section 1231 (1) and 1231 (2) of the Companies Act 2006 (November 2025)
Financial Reporting Council
Report of the Independent Supervisor on Auditors General
Presented to Parliament pursuant to section 1231(3) of the Companies Act 2006. Ordered by the House of Commons to be printed on 5 November 2025 HC 1364
OGL © Financial Reporting Council Limited 2025
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1. Introduction
1.1The Statutory Auditors (Amendment of Companies Act 2006 and Delegation of Functions etc.) Order 20121 appoints the Financial Reporting Council (FRC) as the Independent Supervisor of Auditors General, which includes the Comptroller and Auditor General (C&AG), the Auditors General of Scotland and Wales and the Comptroller and Auditor General for Northern Ireland, in respect of their work as statutory auditors of companies under the Companies Act 2006 (the 'Companies Act', or 'the Act').
1.2Section 1231 of the Act requires the Independent Supervisor to report on the discharge of its functions, at least once in every calendar year, to the Secretary of State, the First Minister in Scotland, the First Minister and the Deputy First Minister in Northern Ireland, and the First Minister for Wales. This report also meets the statutory reporting requirements set out in the legislation.2
1.3Auditors General are eligible for appointment as the statutory auditors of companies under section 1226 of the Act.
1.4An Auditor General who undertakes statutory audits must comply with the Independent Supervisor's 'supervision arrangements' (see section 2 below), which include arrangements for the monitoring and inspection of the performance of that audit work. To date, only the C&AG undertakes audits under the Act.
1.5The year to 31 March 2024 was the sixteenth year in which the C&AG undertook statutory audit work, auditing the accounts of 65 companies. The National Audit Office (NAO) undertakes this work on the C&AG's behalf, auditing those companies that are owned by Government Departments as well as other public bodies. The responsibilities of the Independent Supervisor do not extend to the wider work of the C&AG and the term 'statutory audit' should be read as meaning the C&AG's remit under the Act.
1.6The FRC Board appointed the NAO as the Independent Auditor of the FRC3 and the NAO provided an audit opinion on the FRC's financial statements as at 31 March 2025, which was laid before the House of Commons. The FRC Board is satisfied that the safeguards in place are sufficient to ensure the independence of the FRC's and NAO's respective roles as Independent Supervisor of Auditors General and as the auditor of the FRC. The FRC, as Independent Supervisor, is accountable to the Secretary of State and the report of the Independent Supervisor is laid before Parliament, while the C&AG is accountable to Parliament through the Public Accounts Commission. The FRC's operations and governance are also established to respect the statutory independence of both parties. The FRC personnel who undertake regulatory activities in respect of the Independent Supervisor are not involved in the preparation of the FRC's financial statements, which are the responsibility of the FRC's Finance team. Decisions and actions required by the FRC in respect of the NAO's annual audit of its financial statements are considered by the Audit and Risk Committee prior to any recommendations to the FRC Board. Meanwhile, the FRC's role as Independent Supervisor and recommendation of the Report of the Independent Supervisor of the C&AG to the FRC's Board are the responsibility of the FRC's Executive Committee, prior to any recommendations to the FRC Board.
2. Supervision arrangements
2.1Section 1229 of the Act requires the Independent Supervisor to establish supervision arrangements, with respect to an Auditor General who undertakes Companies Act audit work, for:
- Determining standards relating to professional integrity and independence ('ethical' standards) and technical standards to be applied by an Auditor General and the manner in which these standards are to be applied in practice;
- Monitoring the performance of statutory audits carried out by an Auditor General; and
- Investigating and taking disciplinary action in relation to any matter arising from the performance of a statutory audit by an Auditor General.
2.2These supervision arrangements are set out in a Statement of Arrangements and Memorandum of Understanding4 between the FRC and the C&AG and include a requirement for the monitoring of the C&AG's statutory audit work by the FRC's Audit Quality Review team, on behalf of the FRC as the Independent Supervisor.
2.3We have enhanced our supervision of the NAO in the current year through the assignment of a named supervisor to work alongside the NAO to assess the effectiveness of the NAO's audit quality initiatives, including reviewing the formulation and progress on action plans, root cause analysis and quality improvement plans.
3. Reporting requirements
3.1We report, in sections (a) to (e) below, in accordance with section 1231 of the Act and regulation 19 of the Statutory Auditors (Amendments of Companies Act 2006 and Delegation of Functions etc.) Order 2012.5
(a) Discharge by the Independent Supervisor of its supervision function
3.2The supervision arrangements require that the C&AG and relevant NAO employees follow technical and ethical standards prescribed by the FRC when conducting statutory audits. They also set out the investigation and disciplinary procedures that would apply were there a need to discipline the C&AG in his/her capacity as a statutory auditor. The relevant standards are those set by the FRC for auditors as applied to the C&AG.
3.3The supervision arrangements also require the C&AG and NAO staff to enable their performance of statutory audits to be monitored by means of inspections carried out under the supervision arrangements.
3.4We meet periodically with the C&AG and senior staff responsible for the audit practice of the NAO on behalf of the C&AG. We have familiarised ourselves with the NAO procedures for discharging these responsibilities and keep abreast of any changes on an ongoing basis. The responsibilities of the Independent Supervisor in 2024/25 are described in sections (a) to (e) of this report. Our AQR team's inspections, described below, were completed effectively. On that basis, we consider that we have discharged our supervision function effectively.
3.5The responsibilities of the Independent Supervisor only extend to statutory audits and do not extend to the wider work of the C&AG.
(b) Compliance by Auditors General with duties under the Act
3.6As noted above, to date only the C&AG has undertaken statutory audits of companies that are within the public sector. The Auditors General of Scotland and Wales and the Comptroller and Auditor General for Northern Ireland are required to notify the Independent Supervisor if they are to undertake statutory audits of companies. No notifications have been received, and each has confirmed in writing to the FRC that they have not undertaken any statutory audits.
3.7Each year, our AQR team inspects a sample of audits performed under the Companies Act 2006 and reviews the NAO's system of quality management supporting audit quality, as it applies to these audits. The key findings of this work are summarised for the Secretary of State in the separate 1229(5A) report.
(c) Notification by Auditors General under section 1232 of the Act
3.8No Auditor General has notified the Independent Supervisor of any other information under Section 1232 of the Act.
(d) Independent Supervisor's enforcement activity
3.9We issued no enforcement notices and made no applications for compliance orders in 2024/25.
3.10The AQR inspection programme for 2024/25 was complete at the date of this report.
(e) Account of activities relating to the Freedom of Information Act 2000
3.11We received no requests for information under the Freedom of Information Act 2000 in our role as the Independent Supervisor.
Financial Reporting Council 5 November 2025
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S.I. 2012/1741 ↩
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As set out in regulation 19 of the Statutory Auditors (Amendment of Companies Act 2006 and Delegation Functions etc) Order, S.I. 2012/1741 and s.1229(5A) of the Act ↩
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As set out in our Annual Report for 2023/24 on the FRC website. ↩
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https://www.frc.org.uk/documents/774/Signed_statement_of_arrangement_and_MOU.pdf ↩
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S.I. 2012/1741 ↩