A public interest entity (PIE) in UK company law is one of three things: an issuer whose transferable securities are admitted to trading on a UK regulated market, a credit institution that is a CRR firm under the UK Capital Requirements Regulation, or an insurance undertaking. Audits of PIEs carry extra rules: an audit committee, mandatory tendering and a 20 year cap on auditor tenure, five year partner rotation, a restricted list of non audit services with a fee cap, and a longer auditor’s report.

Which entities are public interest entities?

The definition is in section 494A of the Companies Act 2006. A PIE is:

  1. an issuer whose transferable securities are admitted to trading on a UK regulated market;
  2. a credit institution within Article 4(1)(1) of the Capital Requirements Regulation that is a CRR firm; or
  3. a person who would be an insurance undertaking under Article 2(1) of the Insurance Accounts Directive as it applied before the UK left the EU.

The FRC’s glossary confirms that no other entities have been specifically designated in UK law as PIEs. Being a public limited company does not by itself make a company a PIE, and size is irrelevant: a small issuer of listed securities is a PIE while a very large private company is not.

The government had proposed widening the definition to large private companies as part of its audit reform plans. In January 2026 it announced that it was scrapping the Audit Reform Bill, and section 494A has not been extended.

What is an “other entity of public interest”?

The FRC’s Ethical Standard uses a second category for entities that are not PIEs but are of significant public interest. The FRC glossary lists:

  • AIM companies above the SME listed entity threshold;
  • Lloyd’s syndicates;
  • private sector pension schemes with more than 10,000 members and more than £1 billion of assets;
  • entities subject to the governance reporting requirements of the Companies (Miscellaneous Reporting) Regulations 2018, with an exclusion for certain private equity and venture capital fund structures.

Under paragraph 5.43 of the Ethical Standard, auditors of these entities follow the same restricted list of permitted non audit services as PIE auditors, but a footnote to paragraph 5.40 confirms they are not subject to the 70% fee cap.

Must a PIE have an audit committee?

For listed issuers, yes. DTR 7.1 in the FCA Handbook applies to issuers whose transferable securities are admitted to trading and which must appoint a statutory auditor, subject to exemptions such as subsidiaries whose parent already complies. Such an issuer must have a body performing audit committee functions (DTR 7.1.1R). A majority of members must be independent, at least one must have competence in accounting or auditing, the members as a whole need competence relevant to the sector, and the chair must be independent (DTR 7.1.1AR and 7.1.2AR). Under DTR 7.1.3R the body must monitor financial reporting, internal control and the statutory audit, review the auditor’s independence and non audit services, and run the auditor selection procedure.

Companies applying the UK Corporate Governance Code 2024 also follow provision 24, which asks for an audit committee of independent non executive directors with at least three members, or two for smaller companies, and the FRC’s Audit Committee Minimum Standard.

How long can the same audit firm stay?

Section 494ZA sets a maximum engagement period. For engagements starting in a financial year beginning on or after 17 June 2016, the period ends with the earlier of:

  • the last financial year to begin within 10 years of the first day of the last year for which the auditor was appointed after a qualifying selection procedure (a tender); and
  • the last financial year to begin within 20 years of the start of the engagement.

So a PIE must tender at least every 10 years and change firm after 20. The FRC, as competent authority, can extend the period by up to 2 years in exceptional circumstances (section 494ZA(2) and (3)), and publishes those decisions quarterly. Where a PIE has an audit committee, sections 485A and 489A require the committee to run the selection procedure and recommend a first and second choice, with reasons, and the directors’ proposal to members must include that recommendation. For the general appointment rules, see appointing and removing auditors.

Individuals rotate faster. Paragraph 3.9 of the Ethical Standard requires key audit partners on a PIE audit to stop participating no later than five years after appointment and not to return for a further five years.

What non audit services can the auditor provide?

Paragraph 5.40 of the FRC Ethical Standard turns the usual approach around. For a PIE, the audit firm and its network may provide only the services listed in that paragraph, each subject to audit committee approval. The list includes reporting required by law or a regulator, reviews of interim financial information, reporting on covenants and government grants, and other work closely linked with the audit. Anything not on the list is prohibited.

Paragraph 4.13 then caps fees for non audit services, other than those required by law, at 70% of the average audit fees paid in the last three consecutive financial years. The firm also cannot provide internal audit services to any audit client (paragraph 5.45). For the general independence framework, see auditor independence and the FRC Ethical Standard, and on the relationship with internal audit, internal audit vs external audit.

What extra goes in the auditor’s report?

Paragraph 45-1 of ISA (UK) 700 requires the auditor’s report on a PIE to state who appointed the auditor, the date of appointment and the total period of uninterrupted engagement, confirm that the opinion is consistent with the additional report to the audit committee, declare that prohibited non audit services were not provided and that the firm remained independent, and indicate other services provided that are not disclosed elsewhere.

ISA (UK) 701 requires the report to describe each key audit matter for listed entities and for unlisted PIEs, and paragraph 16-2 of ISA (UK) 260 requires a separate written additional report to the audit committee explaining the results of the audit. For how opinions are framed generally, see audit opinions.

Who inspects PIE audits?

The FRC’s Audit Quality Review team monitors the quality of audit work of UK firms that carry out statutory audits of PIEs and certain other entities, and publishes the audits within its inspection scope. Firms auditing PIEs must also report breaches of the Ethical Standard under the FRC’s PIE breach reporting arrangements.

How do the tenure and fee rules work in practice?

Illustration only. A bank with a 31 December year end appointed its auditor after a tender for the year beginning 1 January 2017. Without a further tender, the last year the firm can audit is the year beginning 1 January 2026, the last year to begin within 10 years of 1 January 2017. If the bank tenders and reappoints the firm for 2027, the 20 year limit means the year beginning 1 January 2036 is the firm’s last.

The audit fees for the last three years were £400,000, £420,000 and £440,000, an average of £420,000. Fees for capped non audit services in the current year are limited to 70% of that, £294,000, and each service must be on the permitted list and approved by the audit committee first.

What mistakes come up most often?

  • Assuming every listed or quoted company is a PIE. AIM companies are not PIEs, though larger ones are other entities of public interest.
  • Assuming large private companies became PIEs under the reform proposals, which were dropped.
  • Treating every plc as a PIE. Public company status is not one of the three limbs of section 494A.
  • Counting tenure from the date of the latest engagement letter rather than from the first year of the engagement.
  • Approving a non audit service because it is small, when it is not on the permitted list at all.

For the audit process itself, see how a statutory audit works.

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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.