FRC Annual Review of Audit Quality equips investors and audit committees to make better decisions
News types: Publications
Published: 22 July 2026
The Financial Reporting Council (FRC) has today published its Annual Review of Audit Quality (ARAQ) 2026. The ARAQ provides a market-wide assessment of audit quality and is designed to support better decision-making by audit firms, audit committees and other users of audit. It combines the assessment of Systems of Quality Management (SoQM) with audit file inspections to provide a balanced analysis of the factors shaping audit quality, including firms’ systems, governance and operating models.
The report shows that SoQMs are the foundation of audit quality, underpinning the consistent delivery of quality audit engagements and creating the conditions for sustainable improvements over time. While progress in audit quality continues to be made, the level of consistency varies across the market. A gap between the largest and smallest firms persists, particularly in relation to the development and investment in SoQMs. Strengthening firm-wide systems and capability is therefore central to delivering sustained improvements in audit quality.
Effective regulation creates the conditions for better decision-making. This is a key driver in the FRC’s revised supervisory approach. The FRC has moved to a risk-based and more tailored approach that supports learning and drives improvements across the system. Alongside these revisions, the FRC is implementing targeted programmes to address the underlying drivers of inconsistency across the market. This includes work to build audit firm capacity and capability, and initiatives such as the Audit and Technology Sandbox. These are designed to support innovation, improve audit delivery and help firms develop more effective systems and processes.
Anthony Barrett, Executive Director of Supervision“Audit quality and trust in the audit sector are fundamental to well-functioning markets and confidence in the UK economy. Reliable audits support informed decision-making, strengthen accountability and underpin sustainable growth. The FRC’s report helps users of audits make better decisions and enriches conversations with audit firms by providing a balanced assessment of audit quality.
It is encouraging that audit quality continues to improve, but it is not yet being delivered consistently across the market. Strengthening the systems within firms that underpin audit delivery is therefore critical. Well-designed and effectively operating systems of quality management create the conditions for high-quality audit to be delivered consistently over time.
There is no one-size-fits-all approach to delivering audit quality. Firms differ in their structure, strategy and risk profile; what matters is that each firm’s systems can deliver quality outcomes reliably. Our supervisory, investigatory, and enforcement activities deliver improvements in audit quality which support the UK as a great place to raise capital and to do business. We recognise that there is more work to be done in improving audit quality and are committed to a regulatory approach that underpins a thriving and resilient audit market.”
Alongside the report, the FRC has published data on Audit Firm Metrics. This data is a valuable tool for users of audit, in particular audit committees, to consider how audit quality is defined and managed by a firm. This data is not a league table but are published to inform and enrichen discussion between audit firms and users of audit.
The FRC will host a webinar on Wednesday 23 September to discuss the Annual Review of Audit Quality and its approach to supervision. Registrations are now open.