The content on this page has been converted from PDF to HTML format using an artificial intelligence (AI) tool as part of our ongoing efforts to improve accessibility and usability of our publications. Note:
- No human verification has been conducted of the converted content.
- While we strive for accuracy errors or omissions may exist.
- This content is provided for informational purposes only and should not be relied upon as a definitive or authoritative source.
- For the official and verified version of the publication, refer to the original PDF document.
If you identify any inaccuracies or have concerns about the content, please contact us at [email protected].
The Financial Reporting Council’s report on its supervision of the professional bodies during 2025/26
Presented to the Parliament pursuant to section 1252(10) of, and paragraph 10(3) of Schedule 13 to, the Companies Act 2006.
To be printed July 2026
OGL
Financial Reporting Council copyright 2026
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at www.gov.uk/official-documents.
Any enquiries regarding this publication should be sent to us at:
The Financial Reporting Council Limited
13th Floor
1 Harbour Exchange Square
London
E14 9GE
This document is also available on the FRC website at www.frc.org.uk.
Registered number: 02486368
ISBN 978-1-5286-6338-0
E03570344 07/26
Printed on paper containing 40% recycled fibre content minimum
Printed in the UK by HH Associates Ltd. on behalf of the Controller of His Majesty's Stationery Office
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 any omission from it.
The Financial Reporting Council Limited 2026
The Financial Reporting Council Limited is a company limited by guarantee.
Registered in England number 2486368. Registered Office:
13th Floor, 1 Harbour Exchange, London E14 9GE
1. Foreword by Executive Director of Supervision
Anthony Barrett Executive Director of Supervision
I am pleased to present the Financial Reporting Council's 2025/26 report on our supervision of the professional audit, accounting and actuarial bodies. This has been a year of significant progress, partnership and challenge, as the professions the FRC supervises continue to adapt to a rapidly changing regulatory, technological and economic landscape.
Throughout the year, our focus has remained firmly on ensuring that the bodies fulfil their statutory and non-statutory responsibilities, uphold high standards of regulation and education, and contribute meaningfully to maintaining the UK's position as a global leader in audit and actuarial practice.
Proportionate regulation remains the key principle underpinning our approach. We continue to focus on ensuring that regulatory expectations and supervisory activity are aligned to the size, complexity and risk profile of both the professional bodies and the firms they regulate. We ensure that high standards are applied consistently in a way that is evidence based, risk focused and targeted at areas of greatest public interest impact. This has been reinforced through our SME (Small and Medium Enterprise) audit market study and the continued implementation of our revised audit supervision approach. Both initiatives highlight the importance of reducing unnecessary burden, particularly for smaller firms, while maintaining robust protections for audit quality.
Our relationship with the professional bodies remains constructive and open. We have valued their contributions to key reform programmes, including the (SME) audit market study and the publication of Practice Note 28. The study highlighted challenges in the proportionate application of auditing standards and more consistent, risk based supervision across the SME audit landscape. This was alongside support for innovation and technology adoption to strengthen audit quality and support a resilient and competitive market.
We also made important progress in implementing our revised approach to audit supervision, which we were pleased to roll out to the 12 largest PIE audit firms in April 2026. Working alongside the bodies, we continued to refine a more risk focused and responsive model that supports effective regulation while avoiding unnecessary administrative burdens on firms and bodies.
Sustaining a strong pipeline of future auditors remains essential to the resilience and competitiveness of the UK audit market. The FRC has launched its Audit Qualification 2030 and Beyond (AQ2030) project to work with professional bodies and other stakeholders to ensure audit qualification pathways remain relevant, rigorous and attractive. The bodies have played an active role in helping ensure the qualification reflects modern audit practice and the competencies required in an increasingly data driven environment, while maintaining international portability.
We have also continued to support global mobility through progress on mutual recognition agreements (MRA) and memoranda of understanding (MoU), enabling UK qualified auditors to practise internationally and helping to maintain the UK's attractiveness in global markets.
Finally, technological change, particularly the rapid development of Artificial Intelligence (AI), alongside cyber and data resilience, presents both opportunities and risks. These issues should be treated as strategic, cross cutting priorities by the professional bodies. We welcome ongoing guidance and syllabus development. Strong governance, clear accountability and appropriate human oversight remain essential to ensure innovation does not undermine audit quality, professional scepticism or public trust.
I would like to thank the professional bodies for their continued cooperation. The coming period will bring further change, but by working together we can ensure that the UK's audit and actuarial professions remain resilient, internationally competitive and firmly grounded in the public interest.
2. Scope
This is the FRC's 2026 report to the Secretary of State for Business and Trade on how it has discharged the functions delegated to it under the Companies Act 2006 (the Act). The Act requires the FRC to report annually to the Secretary of State on the discharge of these functions which include but are not limited to the FRC supervision of the professional bodies 1.
This report sets out the FRC's findings on matters relevant to the performance of the professional audit, accounting and actuarial bodies 2 and highlights the key themes impacting them. The complete list of our statutory and non-statutory responsibilities under this legislation is set out in Appendix 2.
Many of our responsibilities in respect of UK statutory auditors and audit firms in the non-Public Interest Entity (PIE) market are delegated to the four Recognised Supervisory Bodies (RSBs). Their responsibilities and requirements are set out in Delegation Agreements agreed with the FRC. The education and training of future auditors rests with the bodies the FRC has recognised as Recognised Qualifying Bodies (RQBs).
The FRC conducts supervision of the Institute and Faculty of Actuaries (IFoA) by voluntary agreement. Our oversight is facilitated by a Memorandum of Understanding (MoU) between the FRC and the IFoA.
Professional bodies that we supervise:
RSBs and RQBs
- Association of Chartered Certified Accountants (ACCA)
- Institute of Chartered Accountants in England and Wales (ICAEW)
- Institute of Chartered Accountants in Ireland (ICAI)
- Institute of Chartered Accountants of Scotland (ICAS)
RQB only
- Association of International Accountants (AIA)
- Chartered Institute of Public Finance and Accountancy (CIPFA) (local audit)
Actuaries
- Institute and Faculty of Actuaries (IFoA)
3. Conclusions
Based on our statutory and non-statutory supervision in 2025/26, our principal conclusions are:
- All RSBs and RQBs continue to meet the recognition criteria in Schedules 10 and 11 of the Act.
- All RSBs are complying with all significant aspects of the terms and conditions of the Delegation Agreements.
- We are satisfied that the IFoA's regulatory framework is operating effectively and is being actively reviewed to ensure it remains fit for purpose.
- Although there has been a significant rise in the numbers of complaints received, we did not consider that any of them raised issues of substantive mishandling by any of the professional bodies.
While we are satisfied that the recognitions of the bodies should continue 3, we have nevertheless made requirements and recommendations at bodies where we consider that improvements are needed. Requirements should be implemented within 12-months and recommendations within three years unless we have agreed a different timescale. The suitability and effectiveness of the implementation is assessed in subsequent years' supervision work. Requirements are only made of RSBs that are not fully meeting the terms of their Delegation Agreement.
The requirements and recommendations made to the bodies this year is discussed in section 5.2 and set out in full in Appendix 3.
What this means: Our assessment provides assurance that the relevant professional bodies' recognition should continue and that their regulatory frameworks are operating effectively. However, it also highlights where targeted improvements are required to sustain public confidence and support high audit, actuarial and regulatory standards.
The bodies are expected to deliver action plans that address any requirements and recommendations, and we will test the suitability and effectiveness of implementation through our continued supervision, focusing in particular on effective CPD, timely enforcement outcomes, the robustness and risk focus of audit quality monitoring, and the quality of governance, oversight and management information used to drive continuous improvement.
4. Key themes impacting the profession
Futureproofing the profession
The Government's Modern Industrial Strategy identifies Professional and Business Services as a critical enabler of UK economic growth and competitiveness, underlining the importance of high quality audit as a foundation of trust in markets and investment decisions. As such, it is imperative that both the UK audit profession and its supporting institutions remain resilient, internationally competitive, and equipped to respond to emerging risks and technological change.
The profession is entering a period of accelerated transformation, with implications for qualification pathways, supervisory expectations, and the UK's position in global markets. The FRC has commenced its Audit Qualification (AQ) 2030 and Beyond project to support a strong, resilient future for the UK audit profession. By working with stakeholders to encourage meaningful change across student education and training, the project aims to remove barriers, innovate pathways, and ensure the audit qualification remains relevant, rigorous and appealing to future auditors. The project recognises that a sustainable audit market depends on a robust, forward-looking qualification and the active partnership of the regulated audit education community in shaping and upholding it.
The professional bodies have engaged constructively with this work to date and have emphasised that the newly-qualified auditor of 2030 and beyond will need detailed knowledge of audit and financial reporting and the ability to work with specialisms such as ESG and sustainability, underpinned by a strong foundation in ethics and professional judgement, AI and digital literacy, and transferable professional skills including collaboration, communication and adaptability. The professional bodies have also emphasised the need to maintain the attractiveness and international portability of the qualification, alongside structured, transparent transition arrangements from old to new syllabi to avoid deterring prospective entrants. Ensuring that qualification reforms are introduced in a manner that is manageable for professional bodies, employers and students, avoiding unfunded burdens and unintended consequences that could suppress entry to the profession is a priority.
It is imperative that the profession continues to recruit, train and retain sufficient numbers of auditors with the capabilities required for a modern audit. This includes supporting social mobility by ensuring that entry to the profession is accessible to a broad range of candidates, including through a wide mix of high quality training pathways (for example, graduate, apprenticeship and other work based routes). A substantial reduction to the auditor pipeline risks limiting firms' ability to develop and retain high quality audit teams and increasing pressure on those already in post. This, in turn, may affect resilience across the market, particularly for smaller and mid tier firms, and reinforces the importance of coordinated action by firms and professional bodies to maintain the attractiveness of audit careers and support progression through effective training, supervision and development.
Global mobility and international recognition are also essential to the audit profession. The FRC and the Department of Business and Trade (DBT) are committed to continuing the excellent progress already made and prioritise new Memoranda of Understanding, with target markets including the EU, India, and South Africa. These agreements are central to ensuring that UK-qualified auditors can practise internationally and that the UK remains an attractive destination for talent and investment.
Futureproofing the profession requires a coordinated, transparent, and internationally outward-facing approach. By modernising qualification requirements, strengthening global recognition pathways, reducing unnecessary regulatory divergence, and supporting a sustainable flow of new entrants, the FRC and professional bodies can help secure a profession capable of meeting the needs of a rapidly changing economy while continuing to uphold high standards of audit quality and public trust.
Proportionate regulation
The FRC continues to place strong emphasis on proportionate regulation, ensuring that supervisory expectations are aligned to the size, complexity, and risk level of the professional bodies and the firms they regulate. This approach recognises that effective regulation means the consistent application of high standards in a way that is evidence based, risk focused and targeted at areas of greatest public interest impact.
Our focus has been reinforced through several significant FRC initiatives during the reporting year. The Small and medium-sized enterprises (SME) audit market study, for example, highlighted opportunities to make SME audits more efficient and proportionate. while ensuring that audit quality and public interest protections are not compromised. In undertaking this study, we looked at the system end-to-end, from how SMEs prepare their accounts to the challenges auditors face in delivering audit services. Addressing the issues identified in this report is not solely for the FRC. The RSBs play an important role in overseeing SME audits, and some aspects of the market will naturally be shaped by competition and commercial dynamics.
The study found that the audit market for SMEs is, in our view, broadly functioning well with more than 2,600 audit firms delivering SME audits, and the importance of ensuring that standards are applied in a way that is proportionate to the size, complexity and risk profile of those engagements. In particular, the interaction between the requirements of the standards and the surrounding supervisory environment can, in some cases, discourage some auditors from adopting a more proportionate approach to audits leading to additional work being performed. In addition, there is a perceived lack of scalability of auditing standards and a belief that further support would be useful to aid proportionality in auditing standards. The publication of Practice Note 28: Guidance for audits of small and medium-sized entities, developed with input from the RSBs, is an important step in supporting more consistent and proportionate application in this area.
Building on this work, the FRC will establish a working group with the RSBs to support the embedding of proportionate, risk-based approaches to inspection activity across the SME audit market. Alongside this, further work on the education side will be important to help SMEs and their advisers obtain the greatest value from the audit process, while maintaining confidence in audit quality and public interest outcomes.
In a similar vein, the FRC also launched an initiative to build the capacity and resilience of the audit market by introducing a more proportionate supervisory approach tailored to the needs of smaller firms. Under this scheme, smaller UK PIE audit firms that commit to investing in and developing their Systems of Quality Management will benefit from reduced formal inspection and registration requirements for a defined period, giving them space and time to improve audit quality and grow. This approach, developed in collaboration with audit firms, professional bodies, investors, and other stakeholders, aims to support a diverse and high-quality audit market while ensuring that regulatory oversight is appropriately scaled and targeted for less complex entities.
Similarly, ongoing work under our revised audit supervision approach continues to promote a more efficient, data driven approach to supervision, and support a framework where PIE firm regulation is aligned to audit market impact and audit quality risk.
We have been encouraged to see the principle of proportionality increasingly reflected in the regulatory activities of the professional bodies. Several bodies have refined their audit quality monitoring methodologies to better differentiate between high-risk and low-risk audit areas, moving away from overly standardised "whole-file" approaches. Others have strengthened their CPD monitoring, governance oversight, and enforcement processes, ensuring that scrutiny is directed where it is most needed and that regulatory actions remain fair, balanced, and operationally feasible.
The professional bodies' commitment to proportionate regulation supports a more resilient and competitive audit market, fosters innovation in smaller and mid-tier firms, and reinforces the FRC's objective of maintaining high standards without imposing unnecessary administrative or operational burdens.
Technology
The Institute of Risk Management has placed AI and digital disruption, and cyber and data resilience as its highest emerging risks for 2026. 4 Whilst neither of the risks are new, the rate and pace of change in both areas places an increased obligation on the professional bodies to ensure they are able to mitigate the adverse aspects while harnessing the opportunities of the positive aspects.
The professional bodies can mitigate the risks from AI, digital disruption and cyber incidents by treating them as strategic, cross cutting risks and addressing them consistently in both their own operations and their supervision of firms. This requires strong board level governance and accountability, cautious and transparent use of AI with human oversight, robust cyber and data security, and the skills to understand rapidly evolving technologies. In the context of the firms they regulate, it means setting clear, outcome focused expectations for firms too on AI governance, operational and cyber resilience, and incident response.
We have reviewed in detail each body's governance and transparency in respect of the work within our statutory and non-statutory remit and are confident that each professional body's governance framework and internal operational processes should not hinder them from being able to meet these challenges.
Cyber resilience is equally critical. Recent high-profile incidents to major UK companies have underlined the importance of professional bodies maintaining resilient technology environments, not only to protect sensitive data, but also to support the continuity of their operations. We have highlighted the importance of this in our engagement with the professional bodies, all of whom are addressing these risks through investment in robust technology infrastructure, strengthened internal governance, and clearer accountability for cyber and operational resilience. Several bodies have also published guidance to their regulated community highlighting the importance of robust controls.
Each professional body has also published thought pieces and guidance on the main technological issues impacting the professions, including the growing use of artificial intelligence (AI) in audit, actuarial and accountancy. They consistently emphasised that AI does not alter the fundamental responsibilities of members of these professions.
Accountability and quality control remain human responsibilities that cannot be delegated to automated tools. Professional body guidance has highlighted the risks arising from over reliance on AI, including weakened professional scepticism, reduced transparency, and challenges in evidencing audit judgements.
Two of the main challenges for professional bodies are to understand the technology being adopted by the firms they regulate and to remain aware of possible technological enhancements to their own regulatory processes. Each body's focus on these challenges in 2025 has demonstrated an intent to face them directly and we will continue to engage with them on this as a priority in 2026.
5. Our supervision of the professional bodies
Our risk-based supervision continues to hold the professional bodies to the highest standards, with a strong emphasis on the public interest.
The following data describes key statistics for registered audit firms, professional bodies supervised, registered Responsible Individuals, IFOA Practising Certificate holders, UK Audit Qualifications awarded by RQBs, and registered training offices for audit.
- 3,422 registered audit firms
- 8 professional bodies supervised
- 8,695 registered Responsible Individuals
- 1,082 IFOA Practising Certificate holders
- 2,940 UK Audit Qualifications awarded by RQBs
- 11,243 registered training offices for audit
*Data correct as of 31 December 2025
Our supervision activities take a risk-based, holistic view of each professional body. We consider the membership journey from student through to conclusion of full membership, and each RSB's approach to the supervision of firms and governance of its audit regulatory functions.
We challenge the professional bodies to demonstrate how they meet their regulatory and educational obligations, and support students, members and their regulated community.
As competent authority, the FRC is ultimately responsible for the delegated regulatory activities. Our supervision enables us to assess whether the bodies deliver these effectively, while enhancing audit quality and supporting audit-market resilience.
Our approach with the IFoA mirrors that used for audit supervision and includes reviews of governance, regulatory functions, and the regulatory aspects of examinations and admissions. We assess whether the IFoA's framework is effective and proportionate.
We aim to foster a culture of continuous improvement, where those we regulate take proactive responsibility for high performance in the public interest. This is emphasised by our four faces of regulation model:
The Four Faces of Regulation Model:
- System partner
Educating, collaborating, facilitating and supporting continuous improvement - Supervisor
Supervision and monitoring of requirements, culture and behaviours - Standard setter
Setting appropriate requirements and expectations that support the public interest and growth - Investigator and enforcer
Investigating and enforcing conduct and applying proportionate sanctions
In response to issues, requirements or recommendations raised through our supervision, each body is required to produce an action plan. The plan must identify the actions to be taken, the timeline for delivery, and any supporting information needed to demonstrate progress. Its purpose is to show clearly how the organisation intends to remedy weaknesses, implement improvements, and provide assurance that changes will be completed and embedded effectively.
Over the following pages we will set out how each of the professional bodies performed against our supervision requirements in 2025.
Our 2025/26 Supervision activities
In 2025/26, we continued to deliver our established supervision model, taking a risk based and proportionate approach that reflects the size, complexity and risk profile of each professional body and the firms and individuals they regulate. Our work is designed to provide a holistic view of each body's effectiveness, considering the end to end membership journey alongside the governance, supervision and delivery of regulatory functions.
RSBs and RQBs
| Stage | Work carried out |
|---|---|
| Student member (Schedule 11 requirements) | We focused on the bodies' delivery of recommendations made in our Developing the Quality of Auditor Education and Training (DQAET) report and assessing implementation of open prior year recommendations. |
| Authorised individual (RI registrations, CPD and individual enforcement) |
We observed RSB Authorisation Committees and completed monitoring-related shadowing work and reviewed the effectiveness of CPD regimes. |
| Registered firm (Firm registrations, audit quality monitoring and firm enforcement) |
We met each RSB on a quarterly basis and shadowed each RSB's key regulatory decision-making forums at least once. We conducted focused enforcement reviews covering timeliness, resources, KPI achievement, consent order publications, dual jurisdiction matters and public interest referrals, supported by disciplinary case file reviews. Audit monitoring activity involved shadowing firm visits, undertaking targeted cold file reviews, evaluating the RSBs' own cold file review process, and ensuring the RSBs' assessment of firms' structures and eligibility remained robust. |
| Professional body (Governance and other body wide assurance) |
We reviewed each body's governance arrangements in relation to leadership, division of responsibilities, and audit, risk and internal controls. We conducted a thematic review into the use of Management Information used by boards and committees to support decision-making, and assessed changes to the bodies' rules and regulations. |
IFoA
| Stage | Work carried out |
|---|---|
| Pre-qualified member | We met with IFoA staff to discuss education, exam delivery and invigilation issues and observed a meeting of the Education Committee. |
| Qualified member | We held quarterly meetings with the Actuarial Monitoring Scheme to track progress on thematic reviews and observed the Regulatory Board. |
| We monitored Practising Certificate (PC) Scheme operation through quarterly meetings and tested a sample of PC applications to assess compliance with the scheme's requirements. | We met each RSB on a quarterly basis and shadowed each RSB's key regulatory decision-making forums at least once. We conducted focused enforcement reviews covering timeliness, resources, KPI achievement, consent order publications, dual jurisdiction matters and public interest referrals, supported by disciplinary case file reviews. Audit monitoring activity involved shadowing firm visits, undertaking targeted cold file reviews, evaluating the RSBs' own cold file review process, and ensuring the RSBs' assessment of firms' structures and eligibility remained robust. |
Engagement Framework
A key component of our Supervision model is a program of regular engagement with the professional bodies. Each Supervisor meets with a designated key contact, usually the Executive Director of Regulation or equivalent, at each professional body at least three times a year. In addition, Supervisors meet with other key personnel to ensure they have a complete understanding of the regulatory and operational strategy at each body and ensure FRC messages are communicated effectively.
| Meeting | Purpose | Meetings held in 2025 |
|---|---|---|
| Annual Planning Meeting | To set out Supervision activities for the year ahead. | All professional bodies |
| Annual CEO meeting | To discuss key matters relating to the operational and strategic direction of the body. | All professional bodies |
| Annual CFO meeting | To discuss the body's annual report and accounts and forward planning. |
|
| Annual Independent Board Chair Meeting | To discuss governance, Board priorities, and strategic risks. |
|
| Annual Regulation Board Chair meeting | To discuss key regulatory issues, Board remit, and assurance mechanisms. |
|
| Annual Education Board Chair meeting | To discuss qualification standards, CPD frameworks, and education governance. |
|
| Annual Reporting Meeting | To discuss the findings of our annual Supervision work. | All professional bodies |
| Key appointment meetings | Ad hoc meetings to assess how well we believe candidates meet our criteria for senior roles on the professional body and then to provide feedback identifying areas of relevance to their decision-making and/or induction processes. |
|
5.1 Trends across the professional bodies' activities
i. Registration of firms and Responsible Individuals (RIs)
Audit firm and RI registration numbers continued to decline across all RSBs. In 2025, all RSBs reported further reductions in the number of registered audit firms, with declines typically in the range of 8–10% year on year. This pattern reflects a continuation of a decade long reduction in the number of firms undertaking statutory audit work
The primary drivers of falling registrations are common across all bodies. They have reported that mergers and acquisitions (including private equity driven consolidation), rising audit exemption thresholds for smaller companies, and demographic factors such as partner retirement and succession challenges in small practices. Many smaller firms report that audit now represents a diminishing proportion of their overall business, reducing the commercial incentive to retain audit registration. Where audit client demand is limited, firms are increasingly choosing to de-register.
The bodies have reported that regulatory requirements also appear to be influencing the decline in numbers, particularly for small and mid tier firms. Eligibility rules requiring audit firms to be majority controlled by qualified auditors, alongside tighter partner voting and control provisions introduced in recent years, have been highlighted as potential barriers to external investment and growth. These constraints can limit firms' ability to restructure, attract capital, or diversify ownership, increasing the likelihood of mergers or exit from the audit market altogether.
Registered Audit Firms – 2024 to 2025
| RSB | Year | New applications | Withdrawals | Removals | Total Firms | % change |
|---|---|---|---|---|---|---|
| ACCA | 2025 | 23 | 114 | 16 | 1043 | -9.30% |
| ACCA | 2024 | 43 | 130 | 2 | 1150 | |
| ICAEW | 2025 | 82 | 235 | 8 | 1835 | -8.07% |
| ICAEW | 2024 | 111 | 240 | 3 | 1996 | |
| ICAS | 2025 | 2 | 16 | 0 | 85 | -14.14% |
| ICAS | 2024 | 7 | 25 | 0 | 99 | |
| ICAI | 2025 | 8 | 63 7 | 1 | 459 | -10.87% |
| ICAI | 2024 | 11 | 39 | 2 | 515 |
ii. Audit Quality Monitoring
Across the RSBs, audit quality outcomes in 2025 show a mixed but broadly stable picture. ICAS, ICAEW and ICAI inspections identified either modest improvement or continued consistency compared with prior years, with fewer of the most serious deficiencies identified and a broadly stable proportion of satisfactory outcomes. In contrast, ACCA inspections indicated technical audit issues requiring improvement remain a key factor in overall visit outcomes.
The table below summarises the audit firm visit grades for visits that included an inspection of audit work reported by each RSB over the last three years (2023 to 2025). For each RSB, the figures show the percentage outcomes from the firms visited by that body in the year. This provides an indicative view of the distribution of outcomes over time and helps illustrate the assessment set out above. A direct comparison between bodies should be made with caution as the bodies monitor different firms each year. However, trends within each body's own results can provide useful insight into the areas where firms are meeting expectations and where remediation or regulatory action is more frequently required.
Firm Gradings (%) 8
| Firm Gradings (%) 8 | Year | ACCA | ICAEW 9 | ICAI | ICAS |
|---|---|---|---|---|---|
| A Outcomes | 2023 | 0 | 1 | 7 | 0 |
| A Outcomes | 2024 | 2 | 2 | 8 | 0 |
| A Outcomes | 2025 | 0 | 2 | 17 | 0 |
| B Outcomes | 2023 | 80 | 49 | 59 | 18 |
| B Outcomes | 2024 | 73 | 44 | 63 | 24 |
| B Outcomes | 2025 | 73 | 52 | 61 | 13 |
| C Outcomes | 2023 | 4 | 23 | 5 | 73 |
| C Outcomes | 2024 | 16 | 27 | 5 | 60 |
| C Outcomes | 2025 | 18 | 22 | 2 | 80 |
| D Outcomes | 2023 | 16 | 13 | 29 | 9 |
| D Outcomes | 2024 | 9 | 13 | 24 | 16 |
| D Outcomes | 2025 | 9 | 8 | 20 | 7 |
The table below demonstrates the number of visits carried out in comparison to the previous two years. Whilst the number has reduced at ICAEW and ICAI, this is in line with expectations and reflects the position of the six-year statutory cycle.
| RSB | Firms monitored 10 | 2025 | 2024 | 2023 |
|---|---|---|---|---|
| ACCA | Non-PIE firms | 264 | 230 | 269 |
| ACCA | PIE firms | 0 | 0 | 0 |
| ICAEW | Non-PIE firms | 347 | 377 | 462 |
| ICAEW | PIE firms | 15 | 18 | 16 |
| ICAI | Non-PIE firms | 63 | 69 | 98 |
| ICAI | PIE firms | 4 | 3 | 4 |
| ICAS | Non-PIE firms | 16 | 25 | 24 |
| ICAS | PIE firms | 2 | 0 | 1 |
The underlying audit quality issues identified by the RSBs in 2025 are largely consistent across them all and reflect long standing issues. Recurring deficiencies relate to inadequate risk assessment and audit planning, insufficient audit evidence and documentation, weak challenge of management estimates and judgements, and ineffective responses to fraud risk. Problems with audit documentation and evidencing remain particularly pervasive, alongside weaknesses in sampling approaches and incomplete audit coverage of material areas. Compliance with the quality management standards (ISQM 1) continues to be an area of weakness for firms, particularly among smaller firms that have struggled to tailor and evaluate their systems effectively.
Inspection results indicate broadly similar root causes across the profession, notably resource and skills constraints, variable technical knowledge, and pressures on capacity within smaller firms, rather than deliberate non compliance. Familiarity threats arising from long standing client relationships and uneven uptake of targeted training and CPD also continue to affect audit execution and professional scepticism.
The RSBs have sought to address these risks through a combination of enhanced monitoring, remedial actions, and practitioner outreach, differences in monitoring methodologies, grading practices, and enforcement thresholds limit direct comparability of outcomes.
Overall, the 2025 inspection results indicate incremental improvement or stability for most firms but a need for sustained focus on audit execution, documentation quality, and effective implementation of quality management systems.
iii. Continuing Professional Development (CPD)
In 2025, all RSBs continued to assess CPD compliance through their respective monitoring frameworks, with three of the four, ACCA, ICAS and ICAI, reviewing CPD records directly during audit monitoring visits. ICAEW introduced a new monitoring regime, which includes declaration-based process and dedicated firmwide CPD monitoring visits.
Across the RSBs, CPD compliance remained broadly stable compared to 2024, with most reviews demonstrating satisfactory adherence to requirements. ACCA reported the highest proportion of inadequate CPD records in 2025, with 117 of the 243 records (48%) reviewed during audit visits found to be inadequate and referred for follow-up. This was an increase from 72 of 205 (35%) the previous year. ICAS and ICAI, by contrast, reviewed 118 and 223 CPD records respectively and found none to be inadequate.
ICAEW's declaration-based process reviewed 150 RI records in 2025, with 29 found non-compliant which was a significant increase from 2024 where only 3 out of 200 records were deemed to be inadequate. This can be partly explained by the fact ICAEW introduced new CPD regulations which some members may have failed to familiarise themselves with.
iv. Enforcement
Enforcement activity across the RSBs presents a mixed picture. Overall, processes remain effective, but increasing pressure is evident in parts of the system. RSBs have reported the complexity and volume of cases have increased, reflecting heightened public and regulatory scrutiny of audit quality and professional conduct. However, the volume of audit related disciplinary cases remains relatively low compared with the total registered population.
A key trend is the growing challenge of timely complaint handling. Most notably within larger bodies managing higher caseloads. Delays in progressing investigations and concluding disciplinary cases have been identified as an area of concern, with some cases exceeding internal performance targets.
Delays in disciplinary processes risk undermining public confidence and can leave firms or individuals subject to prolonged uncertainty. In response, the FRC has required those RSBs most affected to implement action plans, alongside closer oversight of proposed changes to improve throughput and timeliness.
Overall, the emphasis remains for RSBs to produce robust decisions, which are timely and transparent. Continued regulatory attention is required to ensure disciplinary arrangements remain effective, proportionate, and timely as market pressures intensify.
Audit Education
Across the UK and Ireland, audit education in 2025 continued to demonstrate a high degree of rigour with Recognised Qualifying Bodies (RQBs) maintaining high standards while looking to modernise delivery. All RQBs expanded or embedded digital and blended learning models, improving accessibility and consistency of tuition. Syllabus updates increasingly reflected competencies such as including data analytics, technology, ethics and sustainability, without evidence of reduced standards. Pass rates across most bodies remained stable or improved, indicating that curriculum reform has been absorbed without undermining assessment robustness.
To obtain an audit qualification applicants are required to demonstrate 36 months supervised work experience, part of which must be spent being trained in statutory audit work. The RQBs have always required a slightly different number of days audit experience. By 2026, the RQBs have agreed to standardise the amount of time being trained in statutory audit work to a minimum of 44 weeks. This harmonisation supports confidence that holders of the audit qualification, regardless of awarding body, enter the profession with a consistent baseline of applied audit competence and supervised workplace experience.
In contrast, audit student numbers and qualification awards showed more uneven trends, reflecting market conditions rather than educational weakness. Larger bodies experienced mixed intakes, with some declines in new students despite strong audit qualification completion rates, while smaller bodies saw volatility driven by targeted recruitment or limited pipelines. Notably, exceptional increases in audit qualification awards in some cases reflected one-off backlog clearances, rather than structural growth in the audit workforce. These patterns point to ongoing capacity and attractiveness challenges in the audit profession, influenced by firm consolidation, apprenticeship dynamics and wider labour-market pressures.
Finally, the year highlighted a number of systemic risks and emerging issues requiring continued oversight. Remote assessment technologies and the availability of AI tools increased the risk of candidate misconduct, prompting RQBs to strengthen exam security, proctoring and disciplinary frameworks.
Overall, while audit education frameworks remain robust and responsive, sustaining a sufficient and resilient pipeline of future auditors remains a strategic challenge for the FRC and professional bodies. The FRC's Audit Qualification 2030 and Beyond (AQ2030) programme, which emphasises the importance of maintaining and demonstrating up-to-date skills and competence throughout an auditor's career will keep the attention focused in this area.
Actuarial Regulation
The number of actuaries holding Practising Certificates (PCs) has remained broadly stable in recent years. The introduction of a competency based PC regime in 2022 did not materially alter the size of the PC holder cohort. There is no evidence of capacity constraints affecting the availability of suitably qualified actuaries for statutory roles.
Disciplinary volumes and outcomes within the actuarial profession have remained consistent, with no increase in complaints or serious enforcement action during 2025. The IFoA's revised Disciplinary Scheme, effective from August 2023, has placed greater emphasis on early triage and proportionality, leading to more efficient resolution of lower level cases and no material backlog.
Student membership numbers have also remained consistent. Short term fluctuations in exam participation, linked to changes in exam delivery, have not translated into a decline in overall student numbers or qualification rates. From a regulatory perspective, the continued inflow of students and steady qualification of new Fellows provide reassurance that the future supply of qualified actuaries, including future PC holders, is being maintained.
5.2 Supervision summary
Across the recognised supervisory bodies (RSBs), recognised qualifying bodies (RQBs) and the Institute and Faculty of Actuaries (IFoA), we have seen continued commitment to improving quality, strengthening Continuing Professional Development (CPD) and qualification arrangements, and enhancing governance.
The bodies have responded constructively to our findings from prior years, completing the implementation of requirements and demonstrating improved challenge, better documentation, and more proactive engagement on emerging risks. At the same time, our supervision has identified areas where further improvement is still needed, most notably in the timeliness of enforcement and the proportionality of audit monitoring methodologies.
Throughout 2025, all professional bodies continued to engage constructively and met their relevant recognition requirements 11. Bodies responded positively to supervision activities, contributed meaningfully to cross-regulatory initiatives, and engaged openly on areas of reform and improvement. Participation in thematic reviews, support for strategic programmes and proactive responses to prior-year findings demonstrated a clear commitment to maintaining high standards and strengthening the effectiveness and resilience of regulatory frameworks.
Our supervision identified targeted areas for improvement at some bodies, resulting in a small number of requirements where aspects of delegated regulatory activity were not operating as effectively or consistently as expected. These requirements primarily relate to improving the timeliness and effectiveness of audit enforcement, strengthening the risk focus, proportionality and consistency of audit quality monitoring, and enhancing the robustness and evidencing of CPD monitoring, including clearer documentation of challenge and judgement. In some cases, requirements also address the need for stronger controls, clearer processes and more effective management information to support regulatory decision-making.
While ACCA accounted for a higher number of open requirements, reflecting longstanding pressures in enforcement timeliness and audit monitoring methodology, we do not consider that the weaknesses identified at any body are sufficient to affect our overall conclusion that all bodies continue to meet their recognition criteria. Encouragingly, several bodies demonstrated tangible improvement during the year, including strengthened CPD monitoring arrangements, improved transparency and documentation, enhanced governance oversight, and constructive self-reporting where issues were identified.
We have also made new recommendations to ACCA and ICAEW. At ACCA, the recommendation relates to the need to refine its audit quality monitoring approach to ensure that file inspections are sufficiently risk focused, with appropriate consideration of both the materiality and complexity of the audit areas selected for review. This is intended to support more effective targeting of regulatory resource and greater consistency of outcomes.
At ICAEW, we recommended further development of its CPD monitoring arrangements introduced following the 2023 CPD Regulations. In particular, that it strengthens the evidence base supporting monitoring conclusions by obtaining more structured information from RIs about their reflective activity, and by enhancing its monitoring documentation so that the rationale for conclusions and the nature of challenge can be more clearly understood and independently reviewed.
The Institute and Faculty of Actuaries (IFoA) has appointed a number of new executive leaders over the past year and has engaged proactively with us to ensure we could meet them through our Appointment Meeting process. These meetings have provided a valuable opportunity to understand their priorities in their new roles and to begin building effective working relationships, which will ultimately strengthen our overall engagement with the IFoA. We also welcomed its progress in enhancing its examination arrangements during the year, including the re introduction of invigilated assessments, which supports the ongoing effectiveness of the actuarial qualification framework.
Overall, the professional bodies' continued cooperation, willingness to engage with challenge, and commitment to implementing agreed action plans provide assurance that regulatory frameworks remain effective and that identified weaknesses are being addressed in a timely and proportionate manner, in the public interest.
A full list of open requirements and recommendations at each body is set out in Appendix 3.
5.3 Rules and regulations of the professional bodies
From time to time the professional bodies propose changes to their rules and regulations. Most changes update regulations for new legislative requirements or standards. Other changes improve and update a body's processes and procedures where difficulties or inconsistencies are found in how they work in practice.
The process for approval of changes to a body's rules and regulations is set out in its Royal Charter and principal rules or byelaws. For changes requiring Privy Council approval, we submit our comments as advice to the Privy Council Office. For changes requiring approval by a body's own Council or Regulatory Board we communicate directly with the body.
We review and comment on amendments, requesting changes if needed. We review all rule amendments, including non-audit ones, to assess their impact on our regulatory work. We ensure the amended rules are clear and address identified problems. Our assessment considers the relevance to members, firms, and affiliates, and incorporates findings from our governance oversight.
Changes we reviewed this year include changes enabling CIMA to require applicants to declare spent convictions and cautions so putting CIMA in the same position as other chartered bodies in the field of accountancy. We also reviewed changes proposed by ICAS to approve amendments to its rules relating to removing membership from individuals who fail to respond to regulatory notices or mandatory information requests. We are satisfied that this year's changes will be beneficial and enhance the governance of these bodies.
We have also considered what changes may be required to CIPFA's Charter and Byelaws should its proposed merger with ICAEW proceed, following the announcement on 30 July 2025 that the bodies had signed an agreement to explore a merger. As we have previously noted, such a merger could strengthen CIPFA's longer term financial resilience through shared infrastructure, diversified income streams, and strategic support. In the shorter term, CIPFA continues to monitor this position closely, engaging with the FRC as it considers ways to manage risks which could place pressure on its financial resources including financial obligations under the Accountancy Scheme.
5.4 Complaints about the accountancy bodies
The FRC has a voluntary, non-statutory role in supervising how professional accountancy bodies handle complaints, including those not related to statutory audit. This role is governed by an exchange of letters with the Consultative Committee of Accountancy Bodies (CCAB), covering five of the six chartered accountancy bodies. Chartered Institute of Management Accountants (CIMA) is supervised under a separate arrangement.
Currently the FRC's oversight work specific to accountancy relates to reviewing complaints from individuals who are dissatisfied with the way in which a complaint made to one of the CCAB or CIMA has been handled. When such complaints are referred to the FRC, any ensuing review focuses on whether the body followed its own rules and procedures in its consideration of the complaint. Where the FRC finds that a body has not followed its own procedures, it makes a recommendation to the body to address any failings.
The FRC received 72 complaints about the professional audit, accountancy and actuarial bodies that we supervise. Two complaints were brought forward from the previous year. Forty-eight matters either fell outside the FRC's complaints handling review remit, or the complainant had not exhausted the body's complaints procedure.
We, along with the professional bodies, have noted an increase in the possible use of AI by complainants. Whilst this is perfectly reasonable and increases the accessibility of complainants to use the complaints process, it can lead to inaccuracies and has significantly increased the volume of information received for the average complaint.
Number of complaints received by FRC about the professional bodies: 2023/24 - 2025/26 Total number of complaints received
A bar chart showing the total number of complaints received by the FRC about professional bodies:
- 2023/24: 40 complaints
- 2024/25: 44 complaints
- 2025/26: 72 complaints
Complaints about the professional bodies come to us from a variety of stakeholders including students, members of the profession and public. Most complaints relate to the qualifications process for students (i.e. examinations), the registration process for new firms and RIs, or enforcement action.
- There was a significant increase (64%) in the number of complaints about the professional bodies in 2025/26. We did not note any particular area or theme that led to the increase and none of the complaints were upheld or led to any recommendations. We are generally content with the bodies' approach to managing and resolving complaints and did not make any new recommendations in 2025/26.
Appendix 1: International impact
Regulation of Third Country Auditors
The FRC is responsible for registering non-UK audit firms that audit non-UK incorporated companies with securities admitted to trading on UK regulated markets. These firms, known as Third Country Auditors (TCAs), are required to obtain registration with the FRC before signing any audit reports for the purposes of a UK listing.
As at 31 March 2026, there were 124 registered TCAs.
Equivalence and Adequacy
Following EU exit, the UK adopted all equivalence (of audit regulatory frameworks) and adequacy (of arrangements for sharing audit working papers) decisions made by the European Commission up to that point and, from the date of exit, granted equivalence and adequacy to all EEA states. Responsibility for assessing and determining future equivalence and adequacy decisions then transferred to the UK, underpinned by newly established assessment frameworks. These frameworks enable the Secretary of State to commission the FRC to undertake technical assessments to inform decision-making.
During 2025/26, the FRC completed an equivalence assessment of South Africa and continued to progress equivalence assessments for Egypt and Nigeria. The Nigerian assessment is currently on hold pending some senior appointments at the Nigerian FRC.
The FRC also finalised its adequacy assessment of the competent authority of New Zealand, the Financial Markets Authority (FMA), made a recommendation to the SoS, and that recommendation was accepted. As a result, the adequacy of the FMA will commence from 13 May 2026.
The adequacy assessment of the competent authority of South Africa, the Independent Regulatory Board for Auditors (IRBA), was halted due to issues arising from the way UK legislation was drafted, which prevented the FRC from recommending that adequacy be granted. This was the case notwithstanding South Africa's agreement to include additional clauses in any subsequent working arrangements. The FRC will be working with DBT to address these shortcomings. Meanwhile the adequacy of IRBA terminated on 30 April 2026.
In addition, the FRC has been commissioned to undertake equivalence assessments of the United Arab Emirates and the Abu Dhabi Global Market Authority.
Recognition of Audit Qualifications
We have advanced the UK's global audit reach in previous years through Memoranda of Understanding with Australia, New Zealand, and Switzerland, enabling qualified UK auditors to operate across these jurisdictions. These agreements enhance international career mobility and make membership of UK professional bodies more attractive, while reinforcing the need for UK audit qualifications, training, and ethical standards to remain at the highest level. Further MoUs are in development, supporting the Government's growth and trade ambitions as part of the Modern Industrial Strategy.
We have also ensured that the RQBs have appropriate regulations and arrangements in place to recognise the qualifications of statutory auditors in countries with a trade and co-operation agreement with the UK that includes professional qualifications. There are such trade and co-operation agreements with Norway, Iceland, Liechtenstein and Switzerland and further agreements may follow.
Appendix 2: Our responsibilities
Statutory responsibilities
Statutory audit supervision
The FRC is the competent authority for statutory audit in the UK. Our responsibilities are set out in regulation 3 of the Statutory Auditors and Third Country Auditors Regulations 2016.
The FRC's statutory responsibilities for the supervision of the regulation of statutory auditors are discharged by:
- Supervising the regulation of statutory auditors by RSBs and the award of the statutory audit qualification by RQBs and assessing annually whether the recognised bodies continue to meet the requirements for recognition.
- Assessing that each RSB carries out the Regulatory Tasks delegated to it by the FRC in accordance with the requirements of the Delegation Agreements between the FRC and the RSB. The tasks include the registration of audit firms and individuals, audit firm monitoring, CPD and enforcement.
The FRC has a graduated range of enforcement powers which it may use in cases where an RSB or RQB fails to meet its statutory responsibilities.
Non-statutory responsibilities
The following arrangements are undertaken on a voluntary basis:
Actuarial oversight
The FRC conducts supervision of the IFoA by voluntary agreement. Our oversight is facilitated by a MoU between the FRC and the IFoA, supplemented by a Communications Protocol.
We have aligned our supervision approach to the IFoA with that of the audit professional bodies to ensure consistency and so that we continue to hold it to the same high standards.
Accountancy oversight
By agreement with the six chartered accountancy bodies, the FRC has a voluntary, non-statutory role for supervision of the professional accountancy bodies' assessment of complaints about professional accountancy bodies.
Appendix 3: Complete list of open requirements and recommendations
The authorised individual
| Body | Type | Year made | Detail | Status |
|---|---|---|---|---|
| ACCA | Requirement | 2025 | We require the ACCA to demonstrate to us how internal notifications will be managed in relation to registration matters. | On track |
| ACCA | Requirement | 2025 | We require the ACCA to demonstrate to us how internal notifications will be managed in relation to registration matters. | On track |
| ACCA | Requirement | 2026 | By 29 May 2026, the ACCA must submit a detailed Action Plan to the FRC explaining how it will address the delays in progression of auditrelated enforcements cases. It is a lso required to risk-assess all audit cases that have breached the ACCA’s own KPI and report to the FRC by the end of June 2026 on case risk-profile. It must also devise an internal KPI for its audit cases, to be agreed with the FRC by 29 May 2026. |
On track |
| ACCA | Recommendation | 2026 | ACCA should adapt their risk-based approach to include consideration of both the materiality and complexity of an audit area to ensure the inspection is sufficiently proportionate. ACCA to engage with FRC in advance of submitting a revision to the current approach by 30 June 2026, with implementation from 1 January 2027. |
On track |
| AIA | Recommendation | 2024 | AIA should consider introducing annual communication with Higher Education Institutions (HEI) to confirm they continue to follow AIA terms and conditions for exemptions and for HEIs to provide information on any changes relevant to exempt modules and staff contact details. | On track |
| AIA | Recommendation | 2024 | AIA should consider monitoring exam and qualification completion outcomes for exempt students. | On track |
| ICAEW | Requirement | 2025 | ICAEW should incorporate further steps in its firmwide approach to understand the relationship between the training provided by the firm and its expectations of individual RIs, to ensure that the requirement for reflection in the ICAEW CPD Regulations is achieved in practice. | On track |
| ICAEW | Requirement | 2025 | ICAEW should obtain more structured information from the RI about their reflective activity, including consideration of types of clients and/or industry focus, to enable assessment of whether the CPD they have undertaken is appropriate, adequate, and relevant. | On track |
| ICAEW | Recommendation | 2025 | ICAEW should use this information to challenge RIs on how the CPD they have recorded is relevant to their identified development needs. | On track |
| ICAI | Requirement | 2025 | ICAI must continue to update the FRC on the progress of its plans to catch up with the six-year statutory cycle inspections for firms which continue to hold UK audit registration (where a monitoring visit has not yet taken place), whilst ensuring the six-year visit cycle is met for firms due a visit in 2026. | On track |
| ICAI | Recommendation | 2024 | ICAI should consider introducing improved monitoring of student progress, outcomes and performance, for example, comparisons of exempt and non-exempt students and outcomes by HEI. | On track |
Financial Reporting Council
13th Floor, 1 Harbour
Exchange, London,
E14 9GE
+44 (0)20 7492 2300
www.frc.org.uk
ISBN 978-1-5286-6338-0
E03570344 07/26
Follow us on LinkedIn
-
The relevant functions the FRC is required to report on are the delegated functions of the Secretary of State under Part 42 of the Act, which were delegated to the FRC under Article 7 of the Statutory Auditors (Amendment of Companies Act 2006 and Delegated Functions etc) Order 2012. The FRC is required to report to the Secretary of State under section 1252(10) and Schedule 13 to the Act. ↩
-
By agreement with the six chartered accountancy bodies, the FRC has a non-statutory role for oversight of the regulation by the professional accountancy bodies of their members beyond those that are statutory auditors. This includes the five chartered bodies highlighted in the table above, as well as the Chartered Institute of Management Accountants (CIMA). ↩
-
The FRC does not determine whether the IFoA should retain its recognition as professional body. This comment relates to the RSBs and RQBs only. ↩
-
The Institute of Risk Management is an independent, not for profit professional body for risk management, and its annual Risk Trends report draws on cross sector practitioner insight. ↩
-
IRM Risk Trends 2026 Final by Institute of Risk Management. ↩
-
This meeting also counted as ICAI's Annual Regulation Board Chair meeting. ↩
-
The ICAI data for withdrawals includes an adjustment for Audit Jurisdiction changes in 2025 (20) and in 2024 (4). ↩
-
Whilst the definitions for A-D grades differ in exact wording between the RSBs, they can generally be considered as A: Good/no instances of non-compliance, B: Satisfactory/some remedial instances of non-compliance, C: Unsatisfactory and improvements required and D: Regulatory action required including referral to the body's Registration Committee. ↩↩
-
The numbers in the table for the ICAEW’s outcomes do not add up to 100% because it also uses ‘N’ outcomes for visits where it has not reviewed any statutory audit work. Most ‘N’ ratings are for audit firms that are connected with an active audit firm for eligibility or structural reasons. In these situations, all linked firms are visited at the same time. The percentage of N outcomes for ICAEW visits were 2023 – 13%, 2024–14% and 2025 – 16%. ↩
-
'PIE firms' in this table refers to non-PIE audits at PIE firms. ↩
-
IFoA does not have recognition requirements. ↩