The UK’s Financial Reporting Council (FRC) has updated revised directions for Third Country Auditors (TCAs), which will take effect from 1 September 2026.
The temporary changes will allow audits of Chinese-registered companies listing Global Depositary Receipts (GDRs) on the Shanghai/Shenzhen Stock Connect segment of the London Stock Exchange. These audits will be conducted under Chinese Standards on Auditing.
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The changes follow a consultation held earlier in 2026, when the FRC sought views on proposed amendments to its TCA regime.
That process was launched after the UK Government asked the regulator to consider whether a time-limited adjustment to its policy could ease current barriers for Chinese GDR issuers seeking to list on Stock Connect, while still satisfying the FRC’s statutory duties on audit quality and investor protection.
The FRC’s decision to adopt the revised directions is based on the requirement that TCAs performing Stock Connect Audits under Control Self Assessments (CSAs) make sufficient disclosures to allow investors to assess the risks associated with the use of those standards.
As part of the new approach, TCAs carrying out Stock Connect Audits will be obliged to state in their audit reports that CSAs have been used.
They must also include a statement that CSAs have not been assessed by the FRC as equivalent to International Standards on Auditing.
The FRC will also inform the Financial Conduct Authority that it regards the use of CSAs for Stock Connect Audits as a material matter. It would therefore expect issuers to make appropriate public disclosures to the market about their use.
In addition, the regulator plans to work with the London Stock Exchange Group to explore whether its website and other channels can provide further clarity.
