In Conversation: Supporting smaller audit firms
Published: 10 February 2026
7 minute read
In this podcast, Kate O'Neill, Director of Stakeholder Engagement and Corporate Affairs, and Andrew Meek, Director of Audit Firm Supervision, discuss the FRC's ongoing initiative to build capacity and capability for smaller firms operating in the Public Interest Entity audit market.
The discussion focuses on the initial reception to the FRC’s initiative to support smaller firms, as well as how the FRC is delivering proportionate supervisory activity while supporting the public interest and maintaining accountability. In addition, the podcast sets out how the FRC’s approach will strengthen the firm’s systems of quality management, support audit quality and align with the FRC’s ongoing Future of Audit Supervision Strategy.
Transcript
00:00:07:13 - 00:00:25:00
Kate O'Neill
Hello there, welcome to another FRC in conversation. My name is Kate O'Neill. I'm the director of stakeholder engagement and corporate affairs here at the FRC. And today I'm joined by Andrew Meek, our Director of Audit Supervision here at the FRC. Welcome, Andrew.
00:00:25:02 - 00:00:26:21
Andrew Meek
Kate it's great to be here.
00:00:26:23 - 00:00:49:05
Kate O'Neill
It's a great moment for us to update our listeners as to the initiative that we launched in September 2025, with the aim of supporting small firms into the PIE audit market. So can you just remind us why this is such an important focus for the FRC, and what are we trying to achieve with this project? What are the outcomes you want to see?
00:00:49:07 - 00:01:19:10
Andrew Meek
Yeah. Thanks, Kate. We launched the building Capacity and Capability for Smaller Firms initiative last autumn, as you've pointed out, and we were very keen to look for new, innovative ways to work with firms as they grow in the PIE audit market. But also, more specifically, how can we work directly with firms to support them as they develop their own system of quality management and ensure the delivery of high quality audit?
00:01:19:12 - 00:01:33:22
Kate O'Neill
We'll come back to the systems of quality management in a minute, and let's remind our listeners, what does it mean to be what's called a PIE public interest entity or firm? And who are we talking about when we're thinking of smaller PIE audit firms?
00:01:34:03 - 00:01:58:04
Andrew Meek
Yeah, it's very important that we clearly specify, as you say, the terms that we're using. So any audit firm in the UK that wishes to audit a public interest entity needs to be registered with the FRC specifically to be able to undertake those audits. And that's a registration over and above the registration to undertake other statutory audits, which is done through their professional body.
00:01:58:05 - 00:02:22:13
Andrew Meek
So we have about 30 to 35 firms currently registered as PIE audit firms. If I may use that term. And within those 30 to 35 firms, we identify 12 as being the largest, most systemically important firms. And any firm outside of that largest 12. I would term a smaller firm.
00:02:22:15 - 00:02:40:24
Kate O'Neill
And I guess before we talk about what's different about auditing PIEs and supervising these firms, it is the government who drew the let's call height parameter of which corporate entities were within the PIE definition and which ones weren't. This is not a definition at the FRC draws up.
00:02:41:01 - 00:03:09:08
Andrew Meek
Yeah, that's worth clarification as well. I agree, Kate, the definition of public interest entity is government led. And within that category is anything listed on recognized exchange, such as the London Stock Exchange, which can be a wide variety of entities of different sizes, as you might imagine, ranging from, FTSE 100 global organization down to something which has a relatively small listing, but it is still listed on the London Stock Exchange.
00:03:09:08 - 00:03:23:16
Andrew Meek
The PIE definition also currently includes entities such as banks and building societies and certain insurance entities, so it is quite a wide definition of about 2000 or more entities in the UK.
00:03:23:18 - 00:03:32:05
Kate O'Neill
Andrew. So if you are auditing the PIE, does it require different kind of skill sets, different considerations from the audit firms point of view.
00:03:32:07 - 00:03:53:01
Andrew Meek
So there are some specific requirements. Unique to PIE audits with audit firms have to do in addition to other procedures. So for example the requirement to have an engagement quality review partner, a second partner with oversight of the audit work and various other requirements of audit firms specific for PIE audits.
00:03:53:01 - 00:04:02:14
Kate O'Neill
Thanks. And we'll come back to that quality issue you mentioned in our introductory exchange. So what has been the reception from firms who are eligible for this initiative?
00:04:02:16 - 00:04:31:11
Andrew Meek
When we launched the initiative last autumn, we wrote to the firms that currently audit PIEs outside of the 12 largest and invited them to join an initiative which we termed the SoQM Scalebox, meaning System of Quality Management Scale Box, meaning an initiative which we already had in place, which enables firms to have conversations with us and be supported on their quality journey within a relatively safe environment.
00:04:31:11 - 00:04:41:00
Kate O'Neill
Sorry. I'm sorry just to jump in there too. So many of these initiatives are about building a more resilient market, but also building capability and capacity.
00:04:41:02 - 00:05:03:00
Andrew Meek
Exactly. So we wanted to use our scale box initiative and build on it to support the smaller PIE firms as they grow and build capacity. And I was really pleased that the vast majority of firms accepted the invitation. So we have currently 13 firms working within our scale box.
00:05:03:02 - 00:05:06:10
Kate O'Neill
As you said, on a totally confidential basis.
00:05:06:12 - 00:05:08:02
Andrew Meek
Yes, that's absolutely right.
00:05:08:04 - 00:05:25:04
Kate O'Neill
So it's got to be some formal reduction in the supervision activity of the FRC and the registration requirements for these firms as they go through this process. What would be the key differences in the FRC supervision of these firms who've elected to be part of the initiative?
00:05:25:06 - 00:05:48:11
Andrew Meek
The experience for any one of these firms within our SoQM scale box initiative is going to be a little bit different in each case. And so we are tailoring the offering and the support we can provide depending on where they are in their own particular either journey on developing their system of quality management or where they are in terms of our inspection and supervision cycle.
00:05:48:11 - 00:06:16:23
Andrew Meek
But what we have made sure is that there's always something that we're able to not do to give those firms the resource and space, ability to invest time and thinking into the scale box SoQM, initiative. So for some, that might be delaying, inspection activity for a year or two. In others, we have sought to remove certain restrictions that we have on that firm.
00:06:16:23 - 00:06:32:19
Andrew Meek
If there is either undertakings or conditions to our PIE auditor registration function in others, we're just looking at how we can modify the work we are doing at a certain firm again, to permit them space and time to engage in the program.
00:06:32:21 - 00:06:48:23
Kate O'Neill
That's great, because you're giving them that time and space, as you say. But how we are ensuring that we maintain accountability and high standards of audit quality. If I say, for example, finds instances where enforcement action is required, how would you approach that through this initiative.
00:06:49:00 - 00:07:15:00
Andrew Meek
Each of these firms will still, over the course of the next few years, in some cases, receive an inspection visit where we look at a file engagement of one of their audits, and if there is any enforcement related activity that could be an investigation. It could be we do what's called constructive engagement with some firms where we work with them to remediate as a result of enforcement findings in the past.
00:07:15:00 - 00:07:24:11
Andrew Meek
We will continue that work because it's really important that firms continue to remediate for any FRC-identified weakness or binding.
00:07:24:13 - 00:07:40:19
Kate O'Neill
I guess, you know, this initiative is an example of how the Air Force's supervisory approach is always evolving and shifting its focus to the firm's own systems of quality management. Why is it so important that firms have that ownership over their own quality?
00:07:41:00 - 00:08:11:11
Andrew Meek
We have tried lots of different initiatives and methods to work with firms to improve audit quality. And yes, one of those is our ongoing inspection activity. But over the last few years, we've been able to undertake other activities within supervision, such as, thematic reviews and other initiatives to work with firms on their system of quality management or how they can, as a firm, improve quality across all of their audits.
00:08:11:13 - 00:08:35:14
Andrew Meek
And that is why we believe that a focus on a firm system of quality management is a good additional initiative on top of engagement policies, because if you improve a firm system of quality management, you're impacting the quality of all of the audits that that firm undertakes, not just the 1 or 2, however many you might inspect.
00:08:35:16 - 00:08:51:17
Kate O'Neill
So sometimes much more holistic. So the FRC is currently reviewing our supervisory approach throughout the Future of Audit Supervision Strategy project. How are these two projects aligning with one another, and should stakeholders be viewing them as two sides of the same coin?
00:08:51:19 - 00:09:35:14
Andrew Meek
We are definitely seeing the Scale Box Scheme initiative as part of building capacity and capability for smaller firms, as part of the Future Audit Supervision Strategy initiative. Kate, we've publicly referenced the importance of centering our new approach on a firm system of quality management, and that remains one of the key foundational parts of our FASS initiative. So anything such as SOQM scale box, where we are working with firms to support them and improve and enhance their system of quality management, clearly is integral to our overall goals of our future supervision strategy.
00:09:35:16 - 00:09:53:22
Kate O'Neill
Andrew, and I guess this is an ongoing project. It sounds to me like the take up has been pleasingly high, and it's real enthusiasm for this initiative. I mean, is there an end goal? Is there a podcast we're going to do? Well, I say to you, so what was the answer, Andrew, what's been the success of this initiative?
00:09:54:00 - 00:10:01:12
Kate O'Neill
Or do you see this as something that will just be ongoing as we encourage more firms to be part of the PIE audit market?
00:10:01:14 - 00:10:39:01
Andrew Meek
I think I'd pose two responses to that question. Kate. Firstly, in relation to the firms that are currently receiving our support in the SoQM scale box, those 13 firms will all develop their own stories and examples of how they have used the initiative to enhance their system of quality management. And I am confident that over the 2 to 3 years maximum that will be running this initiative with them, then that will put them in a much better position on their system of quality management as we go into 2027, 2028.
00:10:39:03 - 00:11:11:16
Andrew Meek
So I'm confident that we will have plenty of examples of how that initiative has made a difference for those 13 firms. The second part of building capacity and capability for smaller firms that I think still needs to be developed as we go into 2026 further, is how can we support and work with firms that don't currently audit high engagements, because those would also benefit from the scale box approach to developing and enhancing their system of quality management.
00:11:11:16 - 00:11:22:01
Andrew Meek
So I'm really keen that as we go further into 2026, we engage more with the professional bodies and some of these firms to develop the initiative further.
00:11:22:03 - 00:11:49:14
Kate O'Neill
I think that's a really good point, Andrew. I mean, it's really of all parts of the market, can be part of the success of this initiative, including the professional bodies. Andrew, thank you for your time today and the update on the initiative, which is obviously well underway, and the reference to the future of audit supervision strategy. I think really gives our listeners a sense of how the FRC is looking at its supervisory model across the whole of the market for the benefit of users of audit.
00:11:49:14 - 00:11:52:03
Kate O'Neill
So thank you for your time today.
00:11:52:05 - 00:12:03:16
Andrew Meek
Thank you. Can be definitely looking forward to coming back to talk more about the elements of this as we go further into 2026. But yes, it's been lovely to discuss with you the Building Capacity and Capability project today.