Expanding the PIE Audit Definition

As part of the development of an Audit Reform and Corporate Governance Bill, the UK Government has recently proposed a shift in the definition of Public Interest Entities (PIEs).  

The new proposed threshold was set out in a letter from the Minister to the Business and Trade Select Committee Chair and encompasses private companies that have over £1 billion in turnover and over 1,000 employees. This updates the previously proposed “750:750” threshold, and is additive to the existing PIE definition, which currently includes listed companies, and unlisted banks, insurers and credit institutions.  

How Many Companies are Affected?

At the Centre for Public Interest Audit (CPIA), we conducted an initial analysis using data from available sources which suggests that under this new threshold, approximately 600 additional companies would be brought under the PIE umbrella. This estimate is broadly consistent with the earlier 750:750 proposal and these companies would join an estimated 1,600 entities already in scope under the existing PIE definition.  

However, the number alone does not tell the full story. The composition of these companies ranges from large private groups to subsidiaries of listed PIEs raising further questions about how PIE obligations should apply in complex group structures. For example, should subsidiaries that meet the thresholds independently be required to publish separate PIE-compliant accounts, or does group-level reporting to PIE requirements suffice? 

Data Fragmentation: A Barrier to Precision

Another key challenge in assessing the impact of the new threshold is the fragmentation of public datasets: turnover and employee data are not consistently available in a single source. Instead, data is split across Companies House filings, Office of National Statistics (ONS) population statistics and commercial datasets. In addition, there is currently no complete or definitive public list of PIEs.  

This fragmentation and absence of complete datasets limits the ability of regulators, audit firms and policymakers to accurately scope the reform, assess readiness and the financial impacts.  Should government take forward the proposals and introduce a draft Bill, it will be interesting to see the Business Department’s own analysis in an accompanying Impact Assessment statement. 

Market Capacity: Can the Audit Sector Cope?

The FRC’s PIE Auditor Register lists 36 registered firms and 690 Responsible Individuals (RIs). However, the market remains heavily concentrated, with the Big Four accounting firms responsible for over 90% of PIE audit fees. Challenger firms did increase their overall PIE audit market share from 4% to 13%, showing some increased diversification.   

The introduction of additional PIEs resulting from a new threshold will increase demand for registered PIE auditors and firms. For smaller and mid-tier firms, this presents both an opportunity and a challenge. In addition to the need for qualified, experienced RIs and staff, firms must also comply with the International Standard on Quality Management 1 (ISQM 1), which require robust internal quality management systems, governance structures, and risk assessment processes. 

The ICAEW’s 2025 report on the evolution of mid-tier firms highlights several barriers to entry to the PIE market, including the limitations in capacity and resources and concerns around reputational risk. These factors have led many mid-tier firms to view PIE audits as high risk and low reward, creating a potential strategic misalignment with the government’s objective of expanding the PIE audit market. However, the FRC is committed to supporting small firms into the PIE market with initiatives such as the Scalebox Programme which has recently been updated by the FRC.  

If capacity fails to keep pace, newly scoped PIEs may face delays in auditor appointment, reduced choice, or increased costs, potentially undermining the reform’s intended benefits. This raises a critical question as to whether the audit market can scale to meet the demands of a broader PIE regime without compromising quality or competition.  

Economic Impact: Balancing Transparency and Compliance

The expansion of the PIE definition also imposes additional audit, regulatory, governance and reporting requirements. These are designed to improve transparency, accountability and strengthen public confidence in corporate reporting.  

However, the shift also brings with it a set of economic considerations. PIE audits are typically more complex and subject to stricter regulatory oversight, which inevitably translates into higher costs. Estimates suggest that PIE audits can cost 30–50% more than statutory audits. For companies newly brought into scope, this may also mean investing in internal governance structures, audit committee processes, and reporting systems that meet PIE standards. 

Whilst we await the publication of the government’s impact assessment, the cost-benefit balance of the reform remains difficult to evaluate. 

The Way Forward: Building a Sustainable PIE Audit Framework

The Government has pledged to consider how to incorporate entities that may not meet the size thresholds but are nonetheless of significant public interest. These are companies that deliver essential services, operate in critical infrastructure, or pose systemic risks to UK capital markets.

We explored this question in depth in our recent article “PIE Audit Reform: When Public Interest Entities Fall Outside UK Definition“, highlighting how factors other than size play a role. There is a need for a more nuanced approach to defining public interest in the UK economy.

As the audit reform agenda progresses, the success of the expanded PIE definition will depend on:

• Clarity in audit regulation scope and guidance – ensuring audit professionals understand their obligations and can implement them effectively

• A sustainable audit market with sufficient capacity – expanding beyond the Big Four to foster competition whilst maintaining audit quality and audit transparency

• A clear articulation of what constitutes a public interest entity – incorporating stakeholder engagement to define public interest beyond size thresholds

• Proportionate oversight that reflects entity risk profiles – balancing investor protection with reasonable compliance burdens to maintain market confidence

The expanded PIE definition represents a significant milestone in UK regulatory reform. However, its ultimate success will be measured not just by how many companies are brought into scope, but by whether it delivers meaningful improvements in audit transparency, public trust, and corporate governance standards across UK capital markets.

What are your views on the PIE expansion? Join the conversation by contacting the CPIA or follow our ongoing research into audit reform.