Financial Reporting Council ...

 What is the Financial Reporting Council?

The Financial Reporting Council (FRC) is the UK’s independent regulator of corporate governance, financial reporting, audit and the actuarial profession. In 2019, amid criticisms over the body’s performance, the government decided to replace the FRC with a new Audit, Reporting and Governance Authority (ARGA). But the government reversed this decision in January 2026, despite introducing the necessary legislation in the King’s Speech in 2024.

What does the FRC do?

The FRC was originally established in 1990 with the principal aim of promoting best practice in financial reporting.¹  Over time, its remit has expanded, and its stated purpose is now to serve the public interest by setting high standards of corporate governance, reporting, auditing and actuarial work, and by holding to account those responsible for delivering them.²  In practice, its main work is in overseeing the audit, accounting and actuarial professions, and corporate governance.

The FRC sets the eligibility criteria, and technical and ethical standards, for those approved to carry out the statutory audit of an organisation’s annual accounts in the UK.³  It also maintains, or requires others to maintain, various registers including of those approved to audit public interest or local bodies.⁴

It also issues accounting standards and clarifies conflicting interpretations of those standards. It oversees self-regulation conducted by various professional accounting bodies and monitors compliance with accounting and legal requirements, for example when companies issue directors’ reports.⁵  Its accounting standards are also applicable in Ireland.⁶

The FRC’s role is similar for the actuarial profession – setting standards, overseeing professional bodies and providing an independent investigation and discipline scheme for matters potentially affecting the public interest.⁷

Finally, it oversees corporate governance by setting and monitoring the UK Corporate Governance Code (which applies to companies listed in the UK and Ireland) and the Stewardship Code (which applies to institutional investors in the UK).⁸

What enforcement powers does the FRC have?

The FRC relies on a combination of statutory powers and non-statutory agreements with various other organisations – especially professional bodies – to achieves its aims. In some areas, particularly oversight of the actuarial profession and local authority audit, its concrete powers have been described as “limited or even non-existent”.⁹

It has powers to investigate misconduct by statutory auditors or audit firms and can impose sanctions ranging from a public statement that a breach has been committed to financial penalties and prohibitions from working.¹⁰  It can also take action against members of the professional accounting bodies – individuals or firms – as well as individual actuaries who are members of the Institute and Faculty of Actuaries (IFoA). But the FRC currently has no powers to investigate, take enforcement action or impose sanctions on individuals, including directors, who are not members of these bodies, and its jurisdiction over actuaries relies on agreement with the IFoA.¹¹

How is the FRC structured?

The FRC is a company limited by guarantee¹² , but is also classified as an executive non-departmental public body of the Department of Business and Trade¹³ , and since 2019 its board members have been appointed by the business secretary.¹⁴  It is funded through obligatory contributions from professional bodies and voluntary contributions from private companies, pension schemes and insurance companies.¹⁵

What is the future of the FRC?

Following high-profile auditing and accounting scandals including the collapse of Carillion, the FRC was heavily criticised by the business select committee, which said that its “weak response” contributed to a “crisis of trust in audit”.¹⁶

An independent review by Sir John Kingman in 2018 found it to be “an institution constructed in a different era – a rather ramshackle house, cobbled together with all sorts of extensions over time” and highlighted its lack of a strong statutory foundation and limited powers.¹⁷  The review recommended creation of a new regulator with a clearer sense of purpose and stronger powers.

This recommendation was adopted by the then Conservative government in March 2019,¹⁸  but despite introducing the required primary legislation in the King’s Speech in 2024, the Labour government decided in 2026 not to proceed with establishing the ARGA. In part, this reflected reforms already implemented by the FRC in the intervening period.¹⁹  These reforms have included clarifying its purpose, changing its senior team, increasing its headcount and developing closer relationships with stakeholders who can help it to achieve its objectives.²⁰

However, the FRC still lacks certain powers that can only be strengthened through legislation. For example, it can only take enforcement action against company directors who are members of the accountancy profession and it cannot regulate most non-listed companies, or promote competition in the statutory audit market. In addition, 40% of its income is still derived from voluntary contributions.

The government says it “will still look to put the Financial Reporting Council on a proper statutory footing, as soon as parliamentary time allows.”²¹  But it is not yet clear when this will be.

More - 
https://www.instituteforgovernment.org.uk/explainer/financial-reporting-council