UK Audit Regulation: Navigating Regulatory Complexity Beyond PIE Requirements
How multiple audit regulatory bodies create intersecting oversight challenges for corporate governance and market confidence.
Building on our research
In our previous publications, we examined the evolution of the Public Interest Entity (PIE) definition. We also looked at the differences between PIEs and non-PIEs in terms of Public Interest Entity (PIE) audit, corporate governance and reporting requirements.
Here, we examine the broader regulatory landscape that UK-headquartered companies must navigate. We aim to demonstrate how PIE status is merely one layer within a complex regulatory landscape that impacts UK capital markets.
A landscape of competing oversight
Many companies already face increased scrutiny due to their broader regulatory obligations. This scrutiny comes from multiple regulatory organisations, each working within their own mandates and frameworks. The result is a fragmented environment with intersecting and multilayered oversight across audit regulation, governance, and reporting requirements.
This complexity creates challenges for companies trying to demonstrate accountability whilst managing reasonable compliance burdens. Understanding this broader context is crucial for effective corporate governance, maintaining public trust, and promoting meaningful audit reform through informed government policy.
The regulatory ecosystem
The Financial Reporting Council (FRC) sits at the heart of the audit framework. The FRC applies the PIE definition as set out in the Companies Act for audit purposes, sets professional standards for auditor independence and monitors audit quality. However, regulatory responsibility extends far beyond PIE status; it’s held across numerous bodies, depending on the sector in which companies operate, each contributing to the wider framework of investor protection and market confidence.
Sector-specific regulators
Different sectors face oversight from their own dedicated regulators:
- Financial services firms operate under dual oversight from two main regulators. The Prudential Regulation Authority (PRA) is responsible for financial soundness and risk management. The Financial Conduct Authority (FCA) oversees market conduct and stakeholder engagement.
- The Office of Gas and Electricity Markets (Ofgem) governs the energy sector. It ensures energy providers operate fairly and maintain financial reporting standards that protect consumers’ interests.
- The Pensions Regulator (TPR) safeguards workplace pensions. It addresses risks to pension schemes whilst promoting audit transparency in pension fund reporting.
- The Care Quality Commission (CQC) regulates health and care services in England. It requires audit professionals to meet specific standards when examining the accounts of care providers.
Intersecting mandates and competing requirements
These regulatory bodies are only a small example of the regulatory bodies that exist. Each has a clear mandate, but these mandates often intersect. This creates potential for competing requirements that challenge both regulatory reform efforts and policy intervention strategies.
A listed bank, such as Barclays, must simultaneously satisfy the FRC, FCA, and PRA. Each imposes different disclosure requirements within annual reports and accounts. Similarly, a listed energy supplier like British Gas remains accountable to the FRC for governance and financial reporting. It must also meet Ofgem’s requirements for financial resilience and consumer oversight.
Global complexity
The compliance challenge becomes greater for companies with global operations. These companies must navigate international requirements and regulations, such as those set by the Securities and Exchange Commission in the US or the European Securities and Markets Authority.
This global dimension adds further layers to an already complex regulatory environment. It requires thought leadership and a standalone voice to help companies balance competing demands whilst maintaining audit quality.
A call for coherence
The tables below outline key regulations across audit, governance, reporting and regulatory requirements. This objective research highlights the scope of obligations companies must manage beyond their PIE status, supporting both regulatory reform and enhanced market confidence.
| Regulation | Regulator | Description of the Regulation | Company Type | Audit | Governance | Regulatory | Reporting |
|---|---|---|---|---|---|---|---|
| Ethical Standard for Auditors | FRC | Contains the rules around independence of auditors and provision of non-audit services. | Listed Financial Services | ✓ | |||
| Listed Non – Financial Services | ✓ | ||||||
| Unlisted Banks and Insurers | ✓ | ||||||
| Audit Committee Minimum Standard | FRC | Included in the UK Corporate Governance Code and sets out the minimum standards and expectations around tendering, independence, competence and engagement with auditors. | Listed Financial Services | ✓* | |||
| Listed Non – Financial Services | ✓** | ||||||
| Unlisted Banks and Insurers |
* if Equity Share Commercial Companies or Listed Closed Ended Investment Trusts
** if Equity Share Commercial Companies
| Regulation | Regulator | Description of the Regulation | Company Type | Audit | Governance | Regulatory | Reporting |
|---|---|---|---|---|---|---|---|
| Policy Statement (PS) 16/16 | PRA | Sets out expectations for the composition and functioning of audit committees within banks, building societies. | Listed Financial Services | ✓ | |||
| Listed Non – Financial Services | |||||||
| Unlisted Banks and Insurers | ✓ | ||||||
| Disclosure Guidance and Transparency Rules (DTR) 7.1 Audit Committees | FCA | Mandates that listed companies establish and disclose an audit committee, or equivalent body, and sets out the criteria for audit committees, including competence and independence requirements of the members. | Listed Financial Services | ✓ | |||
| Listed Non – Financial Services | ✓ | ||||||
| Unlisted Banks and Insurers |
| Regulation | Regulator | Description of the Regulation | Company Type | Audit | Governance | Regulatory | Reporting |
|---|---|---|---|---|---|---|---|
| UK Corporate Governance Code | FRC | Framework established that sets the standards of good practices for listed companies. It outlines principles and provisions for board leadership, company purpose, division of responsibilities, composition, succession, evaluation, audit, risk & internal control, and remuneration | Listed Financial Services | ✓* | |||
| Listed Non – Financial Services | ✓** | ||||||
| Unlisted Banks and Insurers |
* if Equity Share Commercial Companies or Close Ended Investment Trusts
** if Equity Share Commercial Companies
| Regulation | Regulator | Description of the Regulation | Company Type | Audit | Governance | Regulatory | Reporting | |
|---|---|---|---|---|---|---|---|---|
| Senior Managers & Certification Regime (SMCR) | FRC and PRA | This regime aims to reduce harm to consumers and strengthen market integrity by creating a system that enables firms and regulators to hold people to account. This places personal accountability on senior individuals, strengthening transparency and governance | Listed Financial Services | ✓* | ||||
| Listed Non – Financial Services | ✓** | |||||||
| Unlisted Banks and Insurers | ✓ | |||||||
| Section 172 Statement | FRC | Requires directors to explain how they have considered stakeholders in their decision-making. | Listed Financial Services | ✓ (if large) | ||||
| Listed Non – Financial Services | ✓ (if large) | |||||||
| Unlisted Banks and Insurers | ✓ (if large) | |||||||
* if Equity Share Commercial Companies or Close Ended Investment Trusts
** if Equity Share Commercial Companies
| Regulation | Regulator | Description of the Regulation | Company Type | Audit | Governance | Regulatory | Reporting |
|---|---|---|---|---|---|---|---|
| Task Force on Climate Related Disclosures (TCFD) | FCA | TCFD-aligned disclosures require detailed narrative and quantitative reporting on climate-related risks and opportunities. This includes governance structures, strategy integration, risk management processes, and metrics and targets. | Listed Financial Services | ✓ | |||
| Listed Non – Financial Services | ✓ | ||||||
| Unlisted Banks and Insurers | |||||||
| Streamlined Energy & Carbon Reporting (SECR) | FRC provides guidance | SECR mandates statutory disclosures on energy use, greenhouse gas emissions, and energy efficiency actions for large UK companies. | Listed Financial Services | ✓ (if large) | |||
| Listed Non – Financial Services | ✓ (if large) | ||||||
| Unlisted Banks and Insurers | ✓ (if large) | ||||||
| Regulation | Regulator | Description of the Regulation | Company Type | Audit | Governance | Regulatory | Reporting |
|---|---|---|---|---|---|---|---|
| Market Abuse Regulation (MAR) | FCA | MAR imposes strict obligations on issuers to control and not disclose insider information, maintain insider lists, and monitor dealings by persons discharging managerial responsibilities. | Listed Financial Services | ✓* | ✓* | ||
| Listed Non – Financial Services | ✓** | ✓** | |||||
| Unlisted Banks and Insurers | ✓ | ✓ |
* if Equity Share Commercial Companies or Close Ended Investment Trusts
** if Equity Share Commercial Companies
| Regulation | Regulator | Description of the Regulation | Company Type | Audit | Governance | Regulatory | Reporting |
|---|---|---|---|---|---|---|---|
| Remuneration Codes | FCA/PRA | These codes impose detailed rules on remuneration structures, including deferral, malus, clawback, and identification of material risk takers. | Listed Financial Services | ✓ | ✓ | ||
| Listed Non – Financial Services | ✓ | ✓ | |||||
| Unlisted Banks and Insurers | ✓ | ✓ |
The Way Forward
In her first Mansion House speech on 14 November 2024, the Chancellor, Rachel Reeves, stated that “the UK has been regulating for risk, but not regulating for growth”. Eight months later, on 15 July 2025, the Chancellor launched the Leeds Reforms. These outlined several measures to simplify the UK’s regulatory landscape, including potential regulatory reform to the SMCR regime.
A patchwork requiring reform
In this briefing, we have demonstrated how the current regulatory landscape results in a patchwork of overlapping mandates. This affects governance, regulatory and reporting requirements, with PIE designation adding another layer of audit-related obligations. Such complexity challenges both audit quality and market confidence in UK capital markets.
Barriers to market entry
The regulatory burden on PIE auditors may also deter mid-tier accounting firms from entering the PIE audit market. The Institute of Chartered Accountants in England and Wales (ICAEW) 2025 report on the evolution of mid-tier accounting firms highlights several factors. These include the cost of compliance, limitations in capacity and resources, and concerns around reputational risk. This combination has created strategic misalignments, leading firms to view PIE audits as high risk and low reward.
This view places the UK audit market at a crossroads. The FRC’s objective of increasing the number of PIE audit providers conflicts with the perceived unattractiveness of PIE audits amongst mid-tier audit professionals, undermining efforts to enhance audit reform and build a more competitive market.
Supporting proportionate regulation
Governance, audit regulation and reporting should not create disproportionate demands on business. We welcome the Government’s ambition to streamline the regulatory framework through targeted policy intervention. This approach should build a more resilient audit market and support a risk-focused strategy. The goal must be striking the right balance between investor protection and stakeholder safeguards whilst supporting the attractiveness of UK capital markets and maintaining public trust in professional standards.
What are your views on audit regulation? Join the conversation by contacting the CPIA or follow our ongoing research into audit reform.
