Risk and Resilience
Published: 8 July 2024
1 minute read
Improving and maintaining the resilience of the UK audit market is a key FRC objective. We assess and monitor various aspects of the larger firms’ operational and financial resilience. Our work is often in the form of private thematic reviews, which are designed to drive improvement and identify weaknesses through benchmarking. We also hold periodic engagement meetings with the firms.
Our work has a strong focus on the firms’ risk management frameworks. We believe that good risk management increases the probability of organisational success and reduces both the probability of failure and the uncertainty of achieving the organisation’s overall objectives. We also review the firms’ internal audit arrangements.
We focus on how firms manage particular risks, such as financial, client and engagement acceptance, operational, regulatory, cyber-security and IT resilience, and network risks that could have consequential impacts. We assess the firms’ recovery and resolution planning frameworks.
In addition, we focus on financial resilience risks. This includes assessing firms’ liquidity and access to credit, and the adequacy of their professional indemnity insurance arrangements.
We assess and monitor the firm’s application of the Operational Separation principles, supported by the Governance and Leadership pillar. The objectives of the principles are to improve audit quality by ensuring people in the audit practice are focused above all on delivery of high-quality audits in the public interest, and to improve audit market resilience by ensuring no material, structural, cross-subsidy persists between the audit practice and the rest of the firm.
| Name | Operational Separation: objectives, outcomes, and principles (October 2024) |
|---|---|
| Publication date | 10 October 2024 |
| Format | PDF, 172.2 KB |
We conduct pre-appointment meetings with candidates for Chief Risk Officers (CROs) within firms. Once appointed, we hold regular engagement meetings with tier one CROs on a firm by firm basis.
The objective of the above activities is to proactively enhance the resilience of audit firms and markets. This serves the public interest by contributing to the foundations that enhance audit quality and audit market competitiveness.