Audit Firm Restructuring
3 minute read
Introduction
Over the past 12 months, the FRC has seen an increase in restructuring activity among Public Interest Entity (“PIE”) audit firms. This page explains at a high level what PIE audit firms can expect from the FRC when they engage in restructuring activity.
While the growth of private capital investment in the audit market is one driver of this activity, firms restructure for a range of commercial, strategic and governance reasons. Such changes may have implications for a firm’s PIE Auditor Registration and to support firms through this process, the FRC has established a dedicated Restructuring team within its Audit Firm Supervision team within the Supervision Division. The team works closely with the PIE Auditor Registration team (the “Registration team”) and the firm’s Supervisor team when a PIE audit firm is proposing to restructure. The Registration and Restructuring teams will also liaise with the firm's Recognised Supervisory Body (“RSB”) and work closely with them throughout the process.
Restructuring is a broad concept and can include changes to ownership through, for example, the listing of a firm on a public market or the investment of private capital, as well as internal reorganisation or changes to the firm’s governance arrangements. In most cases, a restructuring will constitute a Relevant Change under Part 15 of the PIE Auditor Registration Regulations (the “Regulations”). A Relevant Change may include changes to ownership, control, governance, or other matters that could affect eligibility for registration. Firms are encouraged to read both the Regulations and accompanying Guidance document to understand the FRC’s expectations regarding governance changes. Where this is the case, firms must notify the Registration team at [email protected] in accordance with the Regulations.
Context
- The FRC’s CEO has published open letters setting out the FRC’s position on private capital in audit firms:
- External Private Capital and UK Audit Firms (26 September 2024)
- Capital Restructuring at UK Audit Firms (updated) (25 March 2025)
- The Regulations have been updated and are in effect from 20 April 2026.
- Two principal amendments to the Regulations which are particularly relevant to firms undertaking restructuring or ownership/governance changes are:
- Notification of a “Relevant Change” (Part 15), and
- Minimum review period - the FRC expects not less than 90 calendar days from receipt of all required documentation in order to make its determination.
The restructuring process
1. Initial considerations
Firms contemplating any form of restructuring should engage with the FRC and the relevant RSB at the earliest opportunity. Early engagement helps to clarify regulatory expectations and avoid delay.
2. Contacting the FRC
In most cases, a restructuring will constitute a Relevant Change under Part 15 of the PIE Auditor Registration Regulations. Governance and ownership changes could mean that a new audit firm will need to be registered. Firms should contact the Registration team who will advise on the documents which will be needed as part of a new firm application.
3. Scoping discussion
Following initial contact, where applicable, the Restructuring team will arrange a scoping meeting to understand the rationale and structure of the transaction. The Restructuring team will agree a timetable with the firm for the provision of documents and their review.
4. Information request
The Restructuring team will issue a request for information and documentation tailored to the proposed restructuring which firms should respond to in accordance with the agreed timeline.
5. Review period
It is usually expected that a review of the documentation will take not less than 90 calendar days from its receipt. The Restructuring team will review the information provided with input from subject matter experts (such as governance, culture and SoQM) across the Division.
6. Engagement with the firm
The Restructuring team may engage further with the firm to discuss matters arising from its review and request additional clarification or documentation where necessary.
7. Determination
Following completion of its review, the FRC will, where appropriate, provide the firm with a formal written response setting out its determination. This may include Conditions, required actions, or ongoing monitoring expectations.
8. Ongoing monitoring
Where ongoing monitoring or reporting is required — whether through registration measures or otherwise — this will be led by the firm’s Supervisor in conjunction with the Registration team depending on the circumstances, with input from the Restructuring team where required.
Areas of enquiry
Each restructuring transaction is different. The FRC’s information and documentation requests will be tailored to the specific proposal. However, firms can expect the FRC to consider the following core areas.
- Ownership and control
- including how the restructured firm will comply with the Eligibility Criteria.
- Independence
- including how the restructured firm will comply with the requirements of the FRC Ethical Standard.
- Governance
- including how the restructured firm or group will apply the requirements of the Audit Firm Governance Code (where applicable).
- System of Quality Management (SoQM)
- including how the restructured firm's approach to its SoQM will be managed.
- Regulatory matters
- including consideration of how any registration measures and other regulatory matters may be affected by the restructuring.
It should be noted that where a new firm is being registered, firms must wait for a Registration Notice to be issued by the Registration team before any audit work can be undertaken in the new firm.
Additional areas of Focus
In addition, the FRC will wish to understand how the restructuring impacts the following aspects of the firm’s governance and operations (where applicable):
- Cross-border matters
- Confidentiality
- Deal financing and financial resilience
- Operational resilience
- Market considerations
- Resourcing
Contact the Restructuring team
Enquiries in respect of audit firm restructuring can be made to the Restructuring team by email at: [email protected] Firms are urged to engage at an early stage when restructuring is under consideration.
| Name | Audit Firm Restructuring - Introduction and overview |
|---|---|
| Publication date | 31 March 2026 |
| Type | Information sheet |
| Format | PDF, 133.2 KB |