The UK’s Financial Reporting Council (FRC) has unveiled a discussion paper and commenced the next stage of engagement concerning its Future of Audit Supervision Strategy (FASS).

This initiative seeks to refine the FRC’s supervisory methods to cultivate an audit market, enabling firms of varying sizes to provide quality audits while enhancing accountability and fostering improvement.

The FRC underscored the necessity of a sound and proportionate supervisory framework to ensure the sustainability of the audit market and profession, which is essential for preserving the UK’s reputation as a prominent location for business expansion.

Following initial stakeholder feedback on FASS, the FRC has developed a series of proposals for further input.

These proposals are aimed at bolstering confidence among investors, businesses, and the public.

Among the key proposals is the adaptation of the supervisory framework to assess the effectiveness of audit firms’ Systems of Quality Management.

Additionally, the FRC plans to revise the approach to graded file inspections to better align with a firm’s audit portfolio and its role within the market.

The FRC also proposes a transitional phase that would lessen the inspection burden related to the International Standard of Quality Management (UK) for the 12 largest Public Interest Entity audit firms.

Furthermore, the current tiering structure is suggested for removal to avoid categorising firms in FRC reports, thereby applying the supervisory approach more uniformly across the market.

Lastly, the FRC aims to enhance the reporting model for the audit sector to ensure it continues to provide meaningful insights for investors, users of financial statements, businesses, and the public.