6 | The new 2026 FRC audit enforcement procedure
By Alys Jones
Following its consultation which concluded earlier this year, the FRC has now launched its new Audit Enforcement Procedure (AEP), which took effect from 1 July 2026.
The reforms are intended to modernise enforcement to deliver faster outcomes and earlier learnings for the UK audit market.
The 2026 AEP represents a significant structural overhaul and is accompanied by a new guidance note (entitled “Our Approach to Audit Enforcement”), and a suite of supporting policy documents.
The FRC has also published a Decision Statement, providing a formal response to the 28 written responses it received from audit firms and other stakeholders as part of its consultation. In the Decision Statement, the FRC explains which aspects of the AEP were amended in light of the feedback received and, where concerns were not accepted, why the FRC considered no change was necessary.
Role of the “Case Examiner” replaced by “Designated Officer”
A key structural change in the AEP is at the very start of the process. Under the June 2023 AEP, the initial gatekeeper was the FRC “Case Examiner”, an officer who could take initial steps to assess whether there was a question of breach and decide whether the matter should progress, including by referral onwards within the regime. The new AEP replaces that role with a more senior role of “Designated Officer”. It is anticipated in most cases that the Designated Officer will be the FRC’s Executive Director of Supervision. The Designated Officer will have responsibility for (amongst other things) determining whether a breach of a relevant requirement has taken place, and making submissions and any recommendation to the Conduct Committee.
In its Decision Notice, the FRC explains that consultation respondents were “largely supportive” of replacing the Case Examiner with a more senior Designated Officer but expressed concern around resourcing and potential bottlenecks. The FRC responded that the Designated Officer “will be able to access resource, knowledge and other support from across the organisation”, and that decisions would be delegated to another Executive Director where necessary.
Re-worded test
The revised AEP re‑words the test for selecting the appropriate route to resolution so that it combines (i) an evidential threshold – whether there are reasonable grounds to suspect a breach of a relevant requirement – and (ii) an explicit assessment of the public interest.
During the consultation process, stakeholders broadly welcomed the re‑worded test and its more explicit reference to the public interest, but emphasised that clear, published guidance on how the test would be applied – in particular the relevant public interest factors – would be important.
The FRC has responded to this feedback by publishing its Case Assessment and Allocation Policy, which sets out a non‑exhaustive list of public interest factors that the Designated Officer and the Conduct Committee may take into account when assessing the public interest limb of the test. Examples of the public interest factors include where suspected failings are pervasive across multiple audit areas and stages, relate to a potentially material misstatement or going concern disclosure, appear to have affected the appropriateness of the audit opinion and the completeness of reporting to those charged with governance, and/or involve a failure of the firm’s system of quality management.
New Early Admissions Process (Part 3: new)
The new AEP introduces an Early Admissions Process (EAP), which gives Respondents an early route to potential settlement or closure once a Notice of Investigation has been issued. A Respondent may indicate interest within 28 days (or longer if agreed), but participation is at Executive Counsel’s discretion and is not permitted where criminal conduct is suspected. If accepted, the Respondent must produce an EAP Factual Account (with supporting documents) within an agreed timetable (ordinarily no longer than six months) and attest to the robustness and completeness of the enquiries. It is also open to the Executive Counsel to make further enquiries and/or it can terminate the EAP before the Factual Account is received. After review, the Executive Counsel will either enter settlement discussions with the Respondent, continue the investigation, or decide the Respondent is no longer liable for enforcement action under Rule 167 (Part 12).
In feedback received during the consultation, some stakeholders suggested that the EAP should not necessarily involve ‘admissions’ given a review may not have yet been undertaken, and felt the title should instead include neutral terminology such as ‘evaluation’ or ‘resolution’ (for example, the Early Resolution Process). The FRC rejected this suggestion stating that it intends EAP to apply only where respondents are willing to admit breaches, so “the name… reflects its design”.
New “Accelerated Procedure” (Part 5: new)
The 2026 AEP also introduces a new Accelerated Procedure, which allows the FRC to progress cases without a full investigation where the Board considers the “Relevant Information” may already provide the Executive Counsel with sufficient basis to decide whether a breach occurred and if enforcement action should follow. In order to follow this procedure, the Executive Counsel must first assess whether the information is in fact sufficient (and can use its information‑gathering powers to do so) and, if it is, the Executive Counsel is then able to move straight into settlement discussions. If a settlement is not forthcoming, the Executive Counsel then makes a liability decision under the Accelerated Procedure. This “fast‑track” route is new in 2026 and has no equivalent procedure in the June 2023 AEP.
As a result of feedback received during the consultation process, the FRC has decided to include a presumption against commencement announcements in respect of the Accelerated Procedure.
New “Published Constructive Engagement” category
Another new addition to the AEP is the introduction of Published Constructive Engagement (PCE) as a new, distinct early-stage outcome. The FRC has described this route as "combining remediation with public transparency to support improvement and learning for the whole audit market". This sits alongside (and is expressly contrasted with) standard Constructive Engagement, where the commencement and/or outcome shall not be published. The June 2023 AEP did not draw this published/non-published distinction: Constructive Engagement was a single category, without an equivalent “publishable” engagement track.
In its consultation documents, the FRC had envisaged issuing an announcement at the commencement of a PCE matter. Feedback from some stakeholders suggested that an announcement at the outset would be unnecessary and disproportionate given that the route to resolution does not include a finding of a breach of a relevant requirement – and the associated sanction(s) – at its conclusion. The FRC has taken this feedback on board and introduced a presumption against making a standalone announcement (eg press notice) regarding the commencement of a case in respect of which PCE is being conducted, while retaining discretion for the Conduct Committee to issue such a publication if it deems this is appropriate. The FRC will, however, record the commencement of all PCE cases on its website. It is also intended that a standalone announcement will be made of the outcome of a PCE case, unless the Conduct Committee considers it not to be in the public interest.
“Naming and Shaming”
In response to the consultation, a number of large audit firms and other stakeholders challenged the FRC’s practice of publicising enforcement activity at the point an investigation is opened, arguing this can be disproportionate given that allegations are untested and investigations can be lengthy. A particular focus has been the practical impact on individuals: even where the FRC does not expressly name audit partners in opening announcements, publication of the audited entity, audit year and firm can enable straightforward identification of the signing statutory auditor from the audit report, with potentially significant professional and reputational consequences before any findings are made. Stakeholders have suggested that this “day one” publicity is increasingly out of kilter with the more restrained approach typically taken by other regulators when inquiries are first launched.
In its June 2026 Decision Statement, the FRC largely defended commencement announcements for investigations as serving important objectives, including maintaining public confidence in audit and protecting users of financial statements and investors. It reiterated that there is a presumption against naming individual respondents, while acknowledging that individuals may nevertheless be identifiable where the audit (entity and year) is announced because the audit report signature is public. The FRC did, however, indicate a more cautious approach to “day one” publicity for certain new routes: it adopted a presumption against standalone commencement announcements for Published Constructive Engagement (while still recording all PCE openings on its website) and a presumption against commencement announcements for the Accelerated Procedure.
Conclusion
The reforms are intended to make enforcement faster and more proportionate, with clearer public‑interest decision‑making and new resolution routes short of a full investigation. However, the proof will be in the execution: it remains to be seen how the FRC will apply the new AEP and supporting guidance in practice – and whether the new “front door” and routes to resolution deliver quicker outcomes without increasing uncertainty or reputational risk for firms and individuals.
