Updating the FRC's Audit Enforcement Procedure
Published: 1 October 2025
8 minute read
In this episode, Richard Moriarty, CEO, joins Kate O'Neill, Director of Stakeholder Engagement and Corporate Affairs, to discuss the FRC's proposals to update the Audit Enforcement Procedure as part of its End-to-end Enforcement Process Review. The proposals aim to expand the FRC's regulatory toolkit to deliver proportionate responses to different types of failings, and Richard and Kate discuss how the proposed expansion from two enforcement routes to five will enable this, before outlining the FRC's comprehensive plan to engage with a range of stakeholders across webinars and roundtables.
The FRC is hosting a webinar on Wednesday 8 October to discuss the proposals in detail, with an opportunity for Q&A with the expert speakers: Elizabeth Barrett, Executive Director of Enforcement, Kate O'Neill, Director of Stakeholder Engagement and Corporate Affairs, and Anthony Barrett, Director of Audit Quality Review. Register your place.
Transcript
00:00:11:01 - 00:00:34:20
Kate O'Neill
Hello and 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 our CEO, Richard Moriarty. Welcome, Richard. As we're going to discuss the next stage of an important process that many of you listeners have heard us speak about previously, what we call the end-to-end ("E2E") enforcement process review.
00:00:34:20 - 00:00:44:14
Kate O'Neill
So, Richard, this project has been underway. There's been lots of hard work and some engagement so far. Can you just remind our listeners what we are covering in this E2E review?
00:00:44:19 - 00:01:09:15
Richard Moriarty
Thanks, Kate. I think it's important to just step back and for us to keep in mind that where there are serious or significant failings, the public will expect an effective and proportionate investigation by the regulator and possible enforcement action to hold those responsible to account. And what we've done is looked at our enforcement procedures from end to end, hence the name of the programme E2E, to make sure that they remain efficient and effective, that they're proportionate, but also importantly, that they continue to maintain the trust and confidence of the people and the public that we ultimately serve.
00:01:25:12 - 00:01:38:07
Kate O'Neill
Richard, I guess, you know, for some people, enforcement is enforcement. Why are we updating our enforcement? Isn't it always the same? Whatever regulatory environment you work in, people have to be held to account.
00:01:38:09 - 00:02:02:09
Richard Moriarty
There are a couple of reasons. The first is I think it's really important for all regulators to periodically review how they go about their work to make sure that they are doing it in the most effective, efficient, timely, and proportionate way. And also, we have learned from our own experience over recent years—things that work and things that perhaps could work better in how we go about our work. And I think it's really important that we have the courage to be able to say we want to be a learning organisation, we want to improve. And the last time we looked at this was a few years ago, so now's a good time to ensure that we're in the right place with this.
00:02:18:07 - 00:02:32:14
Kate O'Neill
And Richard, I guess we've spoken in previous podcasts and webinars on this topic. This consultation that we're launching today really talks about some of the work that starts in our supervision division.
00:02:32:19 - 00:02:56:08
Richard Moriarty
That's right. I think it's really important that we focus on the upstream parts of this, which is where we have identified a serious or significant potential failing—what is the right and proportionate approach for us to adopt? Part of the issue and part of our learning is that at the moment, we have too narrow a toolkit to deal with this. We can either start a full investigation, or we can deal with it in a private exchange with the firm called Constructive Engagement. And part of our learning over the past few years is that we need a more graduated set of interventions that could be more tailored to the issues that are present. So one of the big changes that we are consulting on in the document that we have just published, is about expanding the range of levers that we've got to make them more proportionate and timely.
00:03:27:24 - 00:03:46:03
Kate O'Neill
Thank you. Before we go into those proposed new levers, I guess it's also important for listeners to understand that, of course, the Audit Enforcement Procedure, which a lot of our work has to relate to, we've updated that twice in the past few years. But again, as you were saying, the market really wants to see us evolving all of the tools in our toolkit, including the Audit Enforcement Procedure, to reflect these changes that you're talking about.
00:03:52:20 - 00:04:17:14
Richard Moriarty
That's right, Kate. In the last few years, we have updated the Audit Enforcement Procedure. But what we've done is updated the operation of our current tools for how we deal with issues. The important change that this set of proposals makes is to introduce a broader range of tools that we could use, where we have identified a need to investigate possible serious or significant failings.
00:04:17:16 - 00:04:33:04
Kate O'Neill
And you mentioned the binary choice. There are some really big changes proposed in this consultation, which proposes, as you've mentioned, increasing the number of routes to resolution available to us. So can you just walk through what are these new routes that we really want to hear from stakeholders on?
00:04:33:06 - 00:04:58:08
Richard Moriarty
Yes. We will always have the two current routes that we've got, and there will always be a need for the regulator to have at its disposal the ability to do a really in-depth investigation of a particular issue and take enforcement action, depending on the evidence. And also there will always be a need for us to have Constructive Engagement and dialogue with the firms to help improve their quality management systems. But what this set of proposals does is expand the range of tools that we've got from two to five. And let me just walk through those. The first additional route to resolution that we're consulting on is something called Public Constructive Engagement. And what this will do is put into the public domain the issues that we are working on with the firm, and also provide an ability for others to learn from what we're doing with that firm. Part of the issue we have with the current Constructive Engagement approach is that it is an entirely private exchange between the regulator and the regulated firm. So this additional lever is to create a pathway where we can make public what we are doing.
00:05:39:09 - 00:05:54:11
Kate O'Neill
And Richard, is that something—because we often mention in podcasts and other interactions how as a learning and improvement regulator, you really look to help, in this case, the wider audit profession really understand what good looks like?
00:05:54:13 - 00:06:28:03
Richard Moriarty
Yes, it's really important that our role in enforcement is both to hold to account—because that's what the public, that's what Parliament will expect—but also to learn from these cases to avoid repetition in the future and therefore ensure that audit quality, audit integrity, and audit trust improve over time. In terms of the other additional routes to resolution that we are consulting on, we are also keen to improve the timeliness of our investigations. We're not alone here—all enforcement agencies, particularly when they do a full investigation, can take some time. So we're introducing two new pathways which could be used in certain circumstances. The first is an Accelerated Procedure. This will be where there is clear evidence of a breach or a clear admission of a failing from an individual or firm. This might prevent us from having to undertake a full investigation, but it would enable us to rightly hold people to account and draw the learning from that sooner rather than later. And then the other pathway, which could be used in a limited set of circumstances—but it's important to have it—is where the firm itself undertakes its own investigation to a scope and standard that we are comfortable with. And again, this is all part of putting in place additional mechanisms to support system improvement.
00:07:26:00 - 00:07:40:03
Kate O'Neill
And you've talked about that in relation to some of our other projects that are under way, for example, "The Future of Audit Supervision", where we're looking at a whole raft of measures for firms themselves to be driving some of these improvements.
00:07:40:05 - 00:08:14:20
Richard Moriarty
Yes. I believe quite strongly that part of the role of the regulator is to set standards and monitor and enforce those standards, but also to encourage the regulated community to take ownership and accountability for improvements and really support that improvement and the trust and confidence that goes with that in the broader stakeholder community. Because after all, the people that rely on financial information and the users of accounts—what they really want more than anything is trust and confidence in what they're reading.
00:08:14:22 - 00:08:39:02
Kate O'Neill
I guess you've been very clear, which is great, that this is not replacing investigations—they are an important part of our toolkit—but this is seen as an evolution, I guess, because going back to your earlier, very good, comment: the binary approach just wasn't giving us that flexibility to investigate in different ways and also in more timely ways, in some cases, Richard, to conclude investigations.
00:08:39:04 - 00:09:00:22
Richard Moriarty
That's right. If you've only got two possible routes, then inevitably there's going to be cases where you think, you know, is it really proportionate to use one of those routes for this type of case? And clearly the challenge that I put down was: why are we relying just on two possible pathways, when actually there may be additional pathways that might be more proportionate? So we would very much welcome views on this in our consultation. And it is important that we hear from the broadest possible stakeholder community. No doubt we will hear from the regulated community, but we're also interested in hearing from users of accounts and those that have a broader view based on the public interest that ultimately we are here to serve.
00:09:21:12 - 00:09:44:09
Kate O'Neill
That's an excellent point, Richard, because I think it can be easy for our listeners to concentrate only on the audit firms. But audit committee chairs, investors—all of our stakeholders have an interest in investigating and finding out why and how conduct has occurred that hasn't supported undertaking an appropriate level of challenge and professional scepticism in an audit.
00:09:44:11 - 00:10:08:06
Richard Moriarty
I'm really keen to hear from audit committee chairs and investors because although some of the consultation is quite technical about how we go about our enforcement work, when you step back from this, investigation and enforcement are such fundamental tools of a regulator to underpin trust and confidence for users of financial information. And that's also important for economic growth and access to capital—people need to be able to trust the numbers they're reading.
00:10:11:14 - 00:10:33:19
Kate O'Neill
So Richard, we're going to hold a series of engagement events—for example, webinars and roundtables—over the duration of the consultation. But also people will find information not just about the consultation on our website, but also some tools, some fact sheets, and some email addresses if people want to get in touch directly.
00:10:33:19 - 00:11:08:05
Richard Moriarty
And I would encourage anyone with an interest in this subject matter to engage with our consultation—let us know their views. We are really keen to get this right. We do believe that the time is right to evolve and update our toolkit, but ultimately the public and Parliament need to be assured that there will be an effective, proportionate regulator that can both protect the public interest but also support economic growth. Therefore, before we make final decisions, we're really keen to see what people make of the proposals that we have just published.
00:11:08:07 - 00:11:27:01
Kate O'Neill
After which we will be publishing a feedback statement, and we'll be assessing with great interest what we hope is a very wide range of responses before we present the final updated proposals—not just through our own governance system, but to our stakeholder community in early 2026.
00:11:27:03 - 00:11:45:18
Richard Moriarty
That's right. I'm keen to make final decisions as soon as we can, but we have to get this right—we have to listen and engage. I expect that different stakeholders will have different views on this, but it's an occupational hazard of regulation that not everyone's going to agree with what you're doing, or indeed agree with each other. But I hope that what people can see with these proposals is a regulator that wants to improve what it's doing—to be more efficient and proportionate—but also is clear-sighted on the underlying public interest and the growth imperative for the work that regulated professionals undertake.
00:12:05:04 - 00:12:18:24
Kate O'Neill
Well, thank you, Richard, and I guess I'm going to call on you again maybe when we conclude the consultation period, just to give us a high-level assessment of those views and what topics stakeholders were most engaged with. So thanks for your time today.
00:12:19:04 - 00:12:19:15
Richard Moriarty
Thank you.