Pre-Appointment Meetings

4 minute read

The FRC holds pre-appointment meetings for key senior roles at audit firms. This is a voluntary process which enables the FRC to influence firms’ decision-making for the benefit of the public interest. The firms and partners make the final decision on whether or not to appoint candidates.

Pre-appointment meetings are held with prospective candidates for Senior / Managing Partners and Heads of Audit across the 12 largest PIE audit firms as part of the FRC’s baseline supervisory procedures. A risk and impact-based approach (incremental supervisory procedures) is adopted for Chairs of Boards, INEs and ANEs, Ethics Partners and Chief Risk Officers. The roles of Independent Non-Executives and Audit Non-Executives are considered in detail in the Audit Firm Governance Code and Operational Separation Principles.

When requesting a pre-appointment meeting, firms should provide the following details:

  • A summary of the selection process, role specification and how the appointment was agreed, including the rationale for the selected candidate.
  • The candidate’s CV, including details of their relevant experience for the role.
  • An overview of the role transition and an assessment of whether the candidate will have sufficient time to undertake the role.
  • Details of how the appointment will complement the firm’s strategy.
  • Details of the reporting structure (i.e. who the candidate will report into and who will report into them).
  • Any other information relevant to the individual’s suitability for the role, including matters that are ongoing or subject to determination.[1]

Characteristics

In a pre-appointment meeting, we will assess how well we believe candidates meet these criteria and feed this back to senior management of the firm. When considering appointments, we will take account of the following characteristics:

Independent Non-Executives and Audit Non-Executives

  • Independence of thought
  • Knowledge of professional services firms (or an induction plan in place to address gaps)
  • An understanding of the public interest and its importance to the activities of an audit firm
  • Ability to command the respect of the firm’s partners
  • Sufficient time to devote to the role

The Audit Firm Governance Code requires knowledge and experience of audit and a regulated sector. At least one INE should have competence in accounting and/or auditing, gained, for example, from a role on an audit committee, in a company’s finance function or at an audit firm.

For firms subject to Operational Separation, at least one ANE should be ‘doubly independent’, meaning they must not be an INE.

Head of UK firm

  • If from an audit background - evidence of involvement in audit quality initiatives within the firm in recent years
  • If from a non-audit background – consideration of how the individual will support audit quality within the firm as Head of UK firm
  • Sufficient time (outside of their portfolio of fee earning work) to devote to the role

Chair of the Board

  • Consideration of how the individual will support audit quality within the firm as Chair
  • An understanding of the public interest and its importance to the activities of an audit firm
  • Sufficient time (outside of their portfolio of fee earning work) to devote to the role

Head of Audit

  • Track record of audit quality (from internal and/or external reviews)
  • Evidence of involvement in audit quality initiatives within the firm in recent years
  • Sufficient time (outside of their portfolio of audit work) to devote to the role

Ethics Partner

  • Track record of involvement in ethical matters/issues within the firm
  • An independent attitude of mind
  • Evidence of sufficient standing within the firm to uphold difficult decisions
  • Sufficient time (outside of their portfolio of fee earning work) to devote to the role

Chief Risk Officer

  • Track record of experience in a risk management and/or a compliance discipline
  • If from a non-audit background, consideration of how the individual will oversee and mitigate the risks to the audit practice as a consequence of the wider activities of the firm
  • Consideration of how the individual’s role will remain free from operational conflicts to facilitate effective risk oversight and challenge

Frequently asked questions

Who does the FRC meet?

Pre-appointment meetings are held with prospective candidates for Senior / Managing Partners and Heads of Audit across the 12 largest PIE audit firms as part of the FRC’s baseline supervisory procedures. A risk and impact-based approach (incremental supervisory procedures) is adopted for Chairs of Boards, INEs and ANEs, Ethics Partners and Chief Risk Officers.

When do meetings take place?

We only expect to meet the firm’s proposed, final candidate for any particular role. For roles which are elected by the partners, we will either meet the newly elected individual as soon as possible after their appointment or meet all short-listed candidates prior to the election of one of them.

What is the process for arranging meetings?

Once the firm has decided on a proposed appointment, the firm should contact their FRC Supervisor to arrange a meeting and provide the information requested. We will try and schedule a meeting as soon as possible so as not to unduly delay the proposed candidate’s formal appointment process.

Who from the FRC will be at the meeting?

The firm’s Supervisor always attends, and other senior FRC staff may also attend depending on the role being considered. FRC attendees may include the Executive Director of Supervision, Director of AFS or Director of AMS, and Senior Leaders of Leadership and Governance, Ethics and Independence, or Risk and Resilience. If the proposed INE or ANE is being recruited by one of the largest six PIE audit firms, then an FRC Senior Advisor will also attend.

What will be the format of the meeting?

We will tailor the content of the meeting depending on the role the individual is being put forward for and their background. We would normally expect to cover the following with the candidate:

  • what they see as their role
  • their understanding of our strategy, the Audit Firm Governance Code and Operational Separation Principles (if applicable)
  • their awareness of current audit supervision issues for the firm or issues from the recent past, and
  • their expectations for their induction programme.

We will discuss any issues which we think the candidate should be aware of and there will also be an opportunity for the candidate to ask the FRC questions in confidence.

What will happen after the meeting?

We will write to the firm to provide high level feedback on the meeting and to identify any areas which it might be helpful to focus on as part of the candidate’s induction process.

Footnotes

  1. [1]

    Such information may include, but is not limited to, conflicts of interest (actual, potential or perceived), complaints relating to the candidate or addressable skills gaps.

Topics

Back to top