FRC invites firms and companies to experiment, innovate and reduce burdens through new sandbox programmes
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Published: 4 June 2026
The Financial Reporting Council (FRC) today announced a significant expansion of its innovation programme, inviting audit firms and companies to work directly with the regulator to explore new technologies, simplify corporate reporting, and reduce unnecessary burdens in the audit market.
Three new initiatives — a new Audit Tech & AI Sandbox, a research programme to understand barriers to technology adoption in audit, and a second round of the FRC’s Simplifying Annual Reporting Sandbox — are designed to accelerate change in areas where new technology presents opportunities and where businesses are currently experiencing challenges. These initiatives represent the next stage of work from the FRC's Innovation and Improvement (I&I) Hub, which brings together expertise from across the organisation to provide practical, collaborative engagement with the market.
Supporting innovation in audit technology
Technology is transforming the audit market. AI and advanced software have the potential to significantly strengthen audit quality, improve efficiency, and increase competition to support an audit market which continues to serve companies, investors and the UK economy. The FRC has already published two landmark pieces of guidance on AI in audit and through the new Audit Tech & AI Sandbox – which opens for applications today – will provide direct access to regulatory expertise, helping firms move faster and with greater confidence.
Successful applicants will work with the FRC to explore how auditing standards apply to new and emerging technologies in practice. Open to audit firms of all sizes across the UK market, the sandbox is designed to support those developing or adopting technology including generative and agentic AI, advanced software or other innovative tools. The role of the FRC is not to develop or endorse specific products, but to engage in collaboration and dialogue to help create the regulatory conditions for innovation that serves the market and the public interest.
Alongside the sandbox, the "Unlocking barriers to audit tech" project will build an evidence-based understanding of the challenges smaller firms face in adopting technology, as highlighted in the FRC’s recent SME Audit Market Study, and convene stakeholders across the sector to identify practical solutions.
Richard Moriarty, Chief Executive of the FRC"Technology, including artificial intelligence, could have a profound effect on the future shape of audit markets around the world. I’m keen for the UK to be at the leading edge of this, supported by a regulatory environment that has a competitive advantage in enabling innovation whilst maintaining high standards and quality that command public confidence. This sandbox reflects our commitment to supporting firms to test and evolve their use of emerging technologies at an early stage to foster mutual learning and ultimately help to put the UK on the front foot in realising benefits for customers and users of audit.
Good regulation should create the conditions for innovation, not hold it back. Through our sandboxes, we are giving firms and companies the confidence to test new approaches while maintaining the high standards that underpin trust in UK markets.”
Helping companies simplify annual reporting
The FRC is also opening applications for a second round of its Simplifying Annual Reporting Sandbox, which aims to address one of the most consistent complaints from companies and investors: that annual reports are too long and complex.
The sandbox will work with companies to streamline disclosures and improve clarity to better meet the needs of investors and reduce potential burdens on businesses. The first round worked with four AIM-listed companies and one FTSE-listed company, and participants reported that they found the sandbox an efficient and effective process which identified actionable findings.
Nick Clark, Chief Executive of Built Cybernetics plc“We were really impressed at the FRC’s approach and their support for us as a small issuer grappling with the challenge of an overly long annual report. Having open discussions was a helpful way to change our approach and start to streamline our disclosures. We were able to identify some near-term changes and further improvements for our annual report in future."
Richard Spilsbury, CFO at Digitalbox plc, describing the value of direct access to technical expertise"I really appreciated being able to talk to technical experts with a common interest in making annual reports more comprehensible. Joining the sandbox has given us greater confidence that we can make our annual report clearer and more effective for its users in future."
The second round will again prioritise smaller listed companies — particularly Small Cap companies, which face distinct challenges in streamlining their reports. Applications are open now, with a four-week window giving companies with December year-ends sufficient time to act on feedback ahead of their next reporting cycle.
Sharing learning on SME audit materiality
Alongside today's announcements, the FRC has published the output from its sandbox initiative on materiality for SMEs, focusing on how to achieve a proportionate approach when providing audit services to smaller organisations. This follows up the findings of the FRC’s market study, which highlighted a perceived lack of scalability of auditing standards which can risk creating unnecessary work.
The sandbox paper reflects discussions with audit practitioners and methodology providers on challenges in setting materiality at an appropriate level for smaller entity audits, where standard percentage ranges - developed with larger entities in mind - may give rise to disproportionate work effort. It explores potential solutions, including greater use of practitioner judgement and a role for the FRC in working with RSBs towards more consistent and appropriate audit inspection for SMEs.
Read the SME materiality sandbox paper.
Find out more and apply to the Audit Tech & AI Sandbox.
Find out more and apply to the Simplifying Annual Reporting Sandbox.