FRC takes systemic look at barriers to competition in UK audit market
News types: Publications
Published: 1 February 2024
The Financial Reporting Council (FRC) has today published a summary of key findings and potential actions from research it commissioned into barriers to entry and growth faced by audit firms in the UK.
The report highlighted capacity constraints, recruitment and retention challenges, alongside regulatory requirements, as the main obstacles for smaller firms looking to expand their presence - especially in audits of public interest entities (PIEs).
To promote greater competition and choice in the audit market, the FRC has highlighted the importance of a collaborative, cross-system approach involving the regulator, audit firms, professional accounting bodies, and government. The FRC itself has already launched initiatives like Scalebox to help smaller firms understand regulatory standards and grow their PIE audit capabilities.
Audit firms are encouraged to prioritise cultures that better support their staff, including training and resources, while professional accounting bodies should continue efforts to attract new talent into the profession and maintain high auditing standards. Government can also play a role with policies that encourage competition and innovation in the audit market.
Mark Babington, Executive Director of Regulatory Standards at the FRC, said:
"While ensuring high standards of audit quality is paramount, a resilient, competitive audit market is crucial for upholding the UK's status as a leading financial centre and protecting the public interest. The research makes clear that tackling the barriers to audit firm growth requires a co-ordinated approach to foster an environment that supports sustainable growth at all audit firms, greater capacity and choice in the market while maintaining high standards."
The FRC plans to conduct further market studies to deepen understanding of audit market dynamics from a resilience perspective.
Read the Barriers to entry and growth in the audit market two-pager.