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Audit Enforcement Procedure Consultation explainer
The FRC's consultation on proposed updates to its routes to resolution, looking at the Audit Enforcement Procedure (AEP), was issued on 1 October 2025.
The consultation looks to broaden the FRC's potential routes to resolution beyond our current options:
Published Constructive Engagement
Under Published Constructive Engagement (PCE), in addition to the FRC's Supervision division working with the audit firm in agreeing and overseeing the implementation of actions to address any issue(s) raised, the allocation of the matter to this route and its outcome is planned to be published via a statement at commencement and conclusion. PCE will require consent from the audit firm and any individual auditors involved.
Accelerated Procedure
This option will facilitate the resolution of matters using suitable evidence already held by the FRC as the basis for proposing breaches and sanctions. The proposed Accelerated Procedure leverages existing robust evidence, where appropriate to do so, rather than opening an investigation under the proposed new Part 4 of the AEP.
Early Admissions Process
The Early Admissions Process would permit subjects under investigation to carry out their own review of a matter, subject to FRC terms, and admit any identified breaches of auditing standards. This is intended to reduce the overall resourcing requirement and time taken for all parties.
The FRC's consultation on proposed updates to the FRC's routes to resolution closes on 9 January 2026. Please send all responses to [email protected].
The FRC is keen to hear feedback and comments from across the stakeholder environment, including audit firms, professional bodies, law firms and users of audited financial statements.
The FRC's end-to-end enforcement process review
In autumn 2024, the FRC commenced a review of its end-to-end audit enforcement process to understand how to further enhance its framework for making enforcement decisions, so it continues to meet the expectations of the modern regulatory landscape. This review considered the FRC's governance structures, decision-making processes, and the operational efficiency and effectiveness of the AEP. The proposed changes to the AEP in the consultation will facilitate further improvement in the end-to-end process.
The consultation proposes a number of changes to our current processes.
Case assessment
We have proposed to remove the concept of an individual Case Examiner and replace it with a 'Designated Officer'.
While it is anticipated that the case assessment functions and process will continue to be undertaken at an operational level in a similar manner, oversight will come from the Designated Officer.
Conduct Committee
The Conduct Committee will be responsible for all decision-making on cases that have been referred to it by the Designated Officer, under the AEP.
These decisions will continue to cover both the route to resolution and the details of any discretionary publications, where they relate to scope and the identification of parties.
Reworded test
We have proposed rewording the current test applied under the AEP when determining a regulatory response, clarifying the language to reflect how the Conduct Committee currently considers cases brought to it.
The first element of the test will be whether there are reasonable grounds to suspect that a statutory auditor or audit firm may have breached a relevant requirement.
Where there are such grounds, the Conduct Committee will then have regard to the public interest to determine the appropriate response to the issues raised.
Implementation and transition
Subject to the outcome of the consultation, the FRC plans for the effective date of the revised AEP to be 1 July 2026.
From this date, all open case assessment enquiries will be subject to the new processes outlined in our consultation.
The Conduct Committee and Executive Counsel will not consider new routes to resolution in their decision-making before this date.
Frequently asked questions
Why is the FRC reviewing its enforcement processes, and why now?
We want to ensure the Audit Enforcement Procedure (AEP), introduced in 2016, remains efficient, effective and proportionate while maintaining trust and confidence as we serve the public interest.
It is good practice for all regulators to periodically review their systems and procedures allowing for continual improvement based on learnings their operation. In 2024 the FRC commenced a review of its end-to-end audit enforcement processes, to understand how to further enhance its framework for making enforcement decisions, ensuring that it continues to meet the expectations of the modern regulatory landscape.
Is the FRC proposing to move away from conducting investigations?
Investigations are, and will remain, an essential part of our regulatory toolkit. A key objective of the FRC's investigation and enforcement regime is to uphold the integrity, quality and independence of statutory audits in the UK. To ensure the continued public trust and confidence in statutory audits, we need to have a case assessment, investigation and enforcement regime that is robust and transparent, responsive to market developments, consistent with its statutory obligations and with an appropriately balanced approach to risk.
Are these proposals more proportionate than the current process?
Where we take action, our approach must always be robust, transparent and effective, while also remaining proportionate and targeting the specific issues that have arisen in any given case. Our proposed new and additional routes to resolution are intended to facilitate more proportionate and targeted regulatory responses to cases across the spectrum, leading to more timely outcomes from audit firms, auditors, and for the FRC.
Are you softening your approach to holding auditors accountable?
This consultation is not about softening our approach, but giving us a more graduated range of options in our regulatory toolkit that give us the opportunity to tailor our approach based on the available options, and therefore be more targeted in the way we respond to the circumstances of individual cases.
How will the FRC define and apply the 'public interest' in its enforcement and investigation activity?
The proposals in our consultation are intended to make more explicit how the public interest is embedded within our decision-making process. We have proposed rewording the test applied by the Conduct Committee when determining its response to potential breaches of relevant requirements, combining an evidential threshold and a public interest assessment. The test will remain in line with how the Conduct Committee considers cases currently.
The existing supporting materials for the AEP will include an updated (although still non-exhaustive) list of public interest factors that will be considered by the Conduct Committee. These factors, appropriately weighted, will be taken into account throughout the process.
What is the Conduct Committee and how do these proposals impact it?
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 manner, and with regard to the Regulators' code. It is made up of FRC Board members and others with a range of skills, experience, and relevant expertise.
The proposals give the Conduct Committee access to a more graduated and broader range of interventions available to resolve cases. The Conduct Committee would decide the appropriate route to resolution based on the individual facts of the case, while having regard to the public interest in line with the proposed rewording of the current test applied under the AEP.
How does case assessment actually work? What changes are you proposing?
Currently, the Case Examiner is responsible for making a number of decisions at the early stages of the AEP process, and is the decision-maker on what matters should be submitted to the Conduct Committee.
Moving forward, we are proposing to remove the concept of an individual Case Examiner and replace it with a 'Designated Officer'.
Case assessment functions and process will continue to be undertaken at an operational level in a similar manner as now, but with oversight from the Designated Officer, who is anticipated to be an Executive Director of the FRC and is currently expected to be the Executive Director of Supervision.
The Designated Officer will be responsible for determining whether a question of a breach of a Relevant Requirement is raised, alongside making submissions and any recommendations to the Conduct Committee.
Why does there need to be a published version of constructive engagement; is it any different to the constructive engagement already in place?
In addition to the FRC working with the audit firm in agreeing and overseeing the implementation of actions to address any issues raised, the introduction of the proposed PCE allows the FRC to have a regulatory response which provides additional deterrence and/ or which makes information publicly available which would benefit other audit firms and the profession.
It is planned that a public statement will be published at the commencement of an audit firm entering PCE, detailing in general terms the issue(s) being addressed, with then a further public statement at the conclusion of PCE, detailing the name of the audit firm, a summary of the concerns raised, and a summary of the key actions taken to address the questions raised.
What will the Accelerated Procedure look like in practice?
The proposed Accelerated Procedure leverages existing robust evidence, where appropriate to do so, rather than opening an investigation under the proposed new Part 4 of the AEP. It will facilitate the resolution of matters using suitable evidence already held by the FRC as the basis for proposing breaches and sanctions.
Through this process, Respondents would be able to acknowledge shortcomings identified through existing evidence and the FRC would be able to pursue a regulatory response that will result in breaches and sanctions being issued. All cases resolved through the Accelerated Procedure route to resolution will require a mandatory publication at their conclusion.
Is the Early Admissions Process just allowing the auditors to mark their own homework?
No - the Early Admissions Process, available after an investigation has been opened, will allow audit firms and individual auditors to conduct their own review of the identified issues on terms explicitly agreed with FRC Executive Counsel. It is designed to reduce the time and resources required for both the FRC and the regulated parties, encouraging self-awareness and accountability.
However, participation is wholly at the discretion of Executive Counsel. A senior partner, independent of the original audit, must attest to the robustness and completeness of the review, and if it is determined by Executive Counsel to be insufficient the FRC will retain the power to continue with a full investigation. The Early Admissions Process will also not be available in any case where criminal conduct is suspected, and is unlikely to be offered where there is an indication of lack of integrity or a failure to cooperate.
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