The Financial Reporting Council (FRC) has announced a new initiative to support the development of small audit firms looking to establish a greater presence in the UK’s public interest entity (PIE) audit market.

As part of the move, the council said it would introduce a new and more proportionate supervisory approach, designed to enhance audit quality and reflect the unique needs of smaller firms.

The FRC is an independent regulator responsible for regulating auditors, accountants and actuaries, in addition to setting the UK’s corporate governance and stewardship codes.

Small firms are to be invited to participate in a new “scalebox programme” where they will work closely with the FRC to develop their audit quality and systems of quality management and support the regulator in assessing what is proportionate in the oversight of less complex PIE entities.

While in the programme, the FRC said that participating firms can expect a reduction in certain formal inspection, supervision and registration requirements during 2025/26 and 2026/27. The regulator suggested this approach recognises that smaller firms face “unique resource and capacity constraints” in building their presence in the PIE market.

“I am keen for the FRC to support the growth of those firms that want to establish a greater presence in the PIE audit market who commit to delivering high quality and safeguarding the broader public interest that audit supports,” CEO of the FRC, Richard Moriarty, commented.

“Small firms have told us to do this they need time and space to build capability in the PIE market itself. Our new scalebox programme intends to meet this challenge head on and help the FRC look closely at what proportionate oversight of smaller PIE audits looks like.

“Whilst in this programme, we will offer participating firms a more forbearing formal regulatory oversight and focus our resources instead on supporting their improvement. Accountability for improvement will, however, rest firmly with the audit firms themselves and a condition of remaining in the programme is that we see progress over time.”

---