FRC publishes minimum standard for audit committees

The Financial Reporting Council (FRC) has announced the release of Audit Committees and the External Audit: Minimum Standard.

https://frc.org.uk/news/may-2023/frc-publishes-minimum-standard-for-audit-committee

The minimum standard for audit committees will be on a voluntary basis initially whilst legislative change is implemented to require adoption by FTSE350s, however, it sets a benchmark for audit committee behaviour for all to consider. 

The key components of the minimum standard for audit committee responsibilities are as follows:

• Requiring that the company manages non-audit service providers to ensure that it has a fair pool of auditors from which to run an audit tender process.
• Conducting the audit tender process, including transparent selection criteria and that the choice of auditor should be based on quality, including independence, challenge and technical competence, not price or perceived cultural fit.
• Reviewing the effectiveness of the external audit process including assessing audit quality, identified audit risks and audit execution plan inviting challenge by the external auditor, giving consideration to points raised and making changes in response, as well as obtaining feedback on how the audit is conducted from relevant stakeholders in the business.
• Reviewing the independence and objectivity of the external auditor and development of a non-audit services policy.
• Reporting to the board and members of the company on how it has discharged its responsibilities in respect of the external audit.

We would expect all audit committees to take note of the release by the FRC of the minimum standard for audit committees, and look forward to working with AC Chairs as they implement the processes required to achieve these standards.

Please contact our team if you have any questions regarding the FRC's announcement.