FRC Annual Report highlights year of innovation and evolving regulatory approach
News types: Generic Announcement
Published: 13 July 2026
The Financial Reporting Council (FRC) has today published its Annual Report and Accounts for 2025/26, covering the period 1 April 2025 to 31 March 2026. The report reflects a year of substantial change, with the FRC continuing to enhance the regulatory environment in support of UK economic growth and investor confidence.
Key highlights from this year's report include:
- Publishing the updated UK Stewardship Code 2026, following engagement with over 1,500 stakeholders. The revised Code sharpens the focus on stewardship activities and outcomes while streamlining reporting requirements, with early evidence suggesting a 20–30% reduction in reporting volume without any loss of quality.
- Introducing a revised supervisory approach, effective from the 2026/27 inspection cycle. The new model places greater emphasis on firms' systems of quality management alongside a reduced reliance on individual file inspection scores, providing a more holistic view of audit quality and embedding a culture of continuous improvement across the sector.
- Developing a broader, more flexible set of routes to resolution through a revision of the Audit Enforcement Procedure, enabling more targeted and timely outcomes while retaining the full range of investigative powers where serious failures occur. This reflects an integrated approach combining robust enforcement with system-wide improvement, maintaining accountability while driving better long-term outcomes and market confidence.
- Completing the SME audit market study, resulting in a package of measures to make audits more proportionate and efficient for smaller businesses, including new guidance on applying auditing standards proportionately, and the launch of the Building Capacity and Capability for Smaller Firms initiative.
- Launching the FRC Innovation & Improvement Hub to provide a structured framework for joint problem-solving between the FRC and its stakeholders, supporting innovation, reducing reporting burdens, and strengthening market resilience. The Hub's first initiative, the 'Simplifying Annual Reporting' sandbox, completed its first cohort in March 2026.
- Publishing guidance for audit firms on the use of generative and agentic AI tools in audit engagements, reflecting the FRC's commitment to being an agile, modern regulator that anticipates and responds to technological change.
- Reporting a robust financial position, with actual overall expenditure of £65.6m against a budget of £72.3m, and a surplus of £3.25m to be transferred to general reserves.
Richard Moriarty, Chief Executive"I am pleased to set out the progress we have made as an organisation in 2025/26, a period characterised by substantial change and evolving stakeholder expectations. Our guiding principle has been to ensure we can demonstrably enhance the regulatory environment to better support growth in the UK by underpinning investor and broader public confidence in corporate governance, reporting, audit and actuarial work. This is critical for companies to access capital to invest, scale and innovate."
The report also notes that Sir Jan du Plessis will retire as Chair in September 2026, with a public appointment recruitment process soon to confirm the FRC’s incoming Chair. The FRC welcomed two new Executive Directors during the year: Anthony Barrett as Executive Director of Supervision and Penrose Foss as Executive Director of Investigations & Enforcement and Executive Counsel.