The Financial Reporting Council (FRC) investigates statutory auditors and audit firms under its Audit Enforcement Procedure (AEP) for audits of public interest entities, AIM companies worth over €200m and Lloyd’s syndicates, and investigates members of six accountancy bodies under the Accountancy Scheme where a case raises important public interest issues. Outcomes run from remedial constructive engagement with no sanction to unlimited fines, repayment of fees, bans from audit work and exclusion from membership.

Who can the FRC investigate?

The FRC is the UK competent authority for statutory audit under the Statutory Auditors and Third Country Auditors Regulations 2016 (SATCAR) and the independent disciplinary body for accountants and actuaries in public interest cases. It runs three main regimes:

  • The Audit Enforcement Procedure for statutory auditors and audit firms, covering audits of public interest entities (listed entities, credit institutions and insurers), AIM companies with a market capitalisation above €200m, and Lloyd’s syndicates. Other audit investigations are delegated to the recognised supervisory bodies, such as ICAEW, but the FRC can take a case back.
  • The Accountancy Scheme for members and member firms of ICAEW, CIMA, CIPFA, the Institute of Chartered Accountants in Ireland, ACCA and ICAS, in non audit work. It typically catches finance directors and other accountants preparing financial statements, and members doing audit work who are not statutory auditors.
  • The Actuarial Scheme for members of the Institute and Faculty of Actuaries.

The FRC has no power to discipline directors who are not members of these bodies. In January 2026 the government told the Business and Trade Committee it would not consult on the planned audit reform legislation, although it still intends to put the FRC on a proper statutory footing when parliamentary time allows. For the ordinary client complaint about a small practice, the professional body remains the route; see complaining to a professional body.

How does an audit case start under the AEP?

Concerns can come from the FRC’s own audit quality reviews, a firm’s self report or another regulator’s findings. Initial enquiries are made by the Case Assessment team under the Designated Officer, normally the Executive Director of Supervision. The Conduct Committee, a committee of the FRC Board, then decides which route to resolution fits the case:

Route Can it lead to a sanction?
Constructive Engagement No
Published Constructive Engagement No
Accelerated Procedure Yes
Enforcement investigation Yes

Constructive engagement is consensual and aimed at remediation, for example reviews of audit procedures, staff training or warning letters. Published constructive engagement is used for less serious breaches where publication serves deterrence or learning, and the FRC usually recovers its costs, capped at the audit fees (and any relevant non audit fees) for the years concerned. The Accelerated Procedure uses information the FRC already holds, such as an audit quality review report, to propose breaches and sanctions without a full investigation. The yardstick throughout is the “Relevant Requirements”, which include the International Standards on Auditing (UK), the Ethical Standard and the quality management standards.

How does a full AEP investigation run?

An investigation is run by Executive Counsel with an in house team of lawyers and forensic accountants. A scoping meeting with the respondents is usually held within a month of the Notice of Investigation. Under the AEP, failing to comply with an FRC information request is a criminal offence. At the end, Executive Counsel issues a Decision Notice setting out the alleged breaches and proposed sanctions. If the respondent accepts, an Independent Reviewer must approve the agreed notice. If not, the case goes to the FRC Tribunal, which decides whether to make an adverse finding and what sanction to impose. Settlement is possible at any point before the Tribunal decides, and the Early Admissions Process lets a respondent carry out its own review and settle on the basis of its admissions. Publication of sanctions is mandatory.

When does the Accountancy Scheme apply to an accountant?

The FRC opens a Scheme investigation when a case raises or appears to raise important issues affecting the public interest in the UK and there are reasonable grounds to suspect misconduct. Public interest factors include impact on a significant number of people, actual or potential loss of significant sums, and conduct that undermines confidence in UK financial reporting or corporate governance. Cases arrive by referral from a professional body or on the FRC’s own initiative.

Misconduct means an act or omission in the course of professional activities or otherwise that falls significantly short of the standards reasonably expected of a member, or brings or is likely to bring discredit on the member or the profession. That links back to the fundamental principles in the bodies’ ethics codes.

After investigation, Executive Counsel serves a Proposed Formal Complaint only if there is a realistic prospect that a Disciplinary Tribunal will make an adverse finding and a hearing is desirable in the public interest. The member has eight weeks to respond before any Formal Complaint is delivered. A member can appeal a Tribunal’s adverse finding within 28 days, on limited grounds, to an Appeal Tribunal. The current Scheme took effect on 1 March 2026.

What sanctions can be imposed?

Under the AEP the sanctions available include:

  • a notice to cease the conduct, and a published statement that may be a reprimand or severe reprimand;
  • orders to mitigate the breach or prevent recurrence;
  • a permanent or time limited ban on carrying out statutory audits or signing audit reports;
  • a declaration that the audit report did not meet the requirements, with an order to waive or repay audit fees;
  • a ban of up to three years on being in the management of an audit firm or a director of a public interest entity;
  • a financial penalty of any amount; and
  • exclusion from a recognised supervisory body, for individuals only.

The Accountancy Scheme schedule covers reprimand, severe reprimand, conditions such as training or restrictions on work, exclusion from membership for a recommended period and a fine. AEP fines go to the government, while Accountancy Scheme fines go to the sanctioned member’s professional body.

How much credit is given for settling early?

The AEP Sanctions Policy (July 2026) divides a case into four stages for discounts on financial penalties:

  1. From the notice opening the case until 28 days after the Proposed Decision Notice: a reduction of between 20% and 35%.
  2. From then until 29 days before the liability hearing: up to 10%.
  3. In the last 28 days before the hearing: up to 5%.
  4. Once the hearing has started: no reduction.

Separately, exceptional cooperation can earn up to 25% off where settlement talks start under the Early Admissions Process or Accelerated Procedure, and up to 15% in other cases. No discount applies to amounts that strip out a benefit gained or to an order to repay fees, and bans are not normally shortened for early settlement.

How might a case look in practice?

Illustration only. An audit quality review finds that an audit partner at a mid tier firm accepted management’s going concern forecasts for a listed client without challenge. The Conduct Committee allocates the case to the Accelerated Procedure. Executive Counsel proposes a breach of ISA (UK) 570, a severe reprimand and a fine of £100,000 for the firm. The firm settles in stage 1 and receives a 30% reduction, so it pays £70,000, and the outcome is published.

What should accountants and firms watch for?

  • Assuming the FRC only deals with auditors. A finance director who is an ICAEW, ACCA or ICAS member can face the Accountancy Scheme.
  • Treating an AEP information request casually, when failure to comply is a criminal offence.
  • Delaying engagement and losing the stage 1 settlement discount.
  • Discussing the case openly. Under paragraph 19 of the Scheme, members must keep non public information about the case confidential unless Executive Counsel consents.
  • Forgetting the firm’s professional indemnity notification conditions when an investigation opens.

Most complaints about smaller firms are handled by the professional bodies instead; see the ICAEW disciplinary process and regulated and unregulated accountants.

Solar Protect runs fee protection schemes for accountancy and bookkeeping practices. See how our accountant schemes work or read fee protection schemes for accountants.

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.