The UK’s Financial Reporting Council (FRC) has issued its 2026 Annual Review of Audit Quality (ARAQ), providing a comprehensive assessment of audit performance across the market.
Intended to support improved decision‑making for audit firms, audit committees and other stakeholders, the review integrates file inspections with evaluations of firms’ Systems of Quality Management (SoQM).
The FRC report identifies Systems of Quality Management (SoQM) as the foundation of audit quality, fostering consistent delivery and facilitating sustained enhancements.
While overall audit quality is showing improvement, performance remains uneven, with a pronounced disparity between large and small firms—especially in their development and investment in SoQMs.
The FRC underscores that strengthening firm‑wide systems and capabilities is vital for enduring improvements in audit quality.
The regulator ties these efforts to its updated supervisory framework, moving to a risk‑based, more tailored model that promotes learning and drives system‑wide improvements.
The FRC is also launching targeted programmes to address the root causes of inconsistency, including initiatives to bolster audit practice capacity and capability and projects such as the Audit and Technology Sandbox, aimed at fostering innovation, enhancing audit execution and strengthening firms’ systems and processes.
FRC Supervision Executive Director Anthony Barrett remarked, “Audit quality and trust in the audit sector are fundamental to well‑functioning markets and confidence in the UK economy.”
Reliable audits enable informed decision‑making, reinforce accountability and underpin sustainable growth.
The FRC’s report assists audit users in making better decisions and enriches dialogue with audit firms by delivering a balanced assessment of audit quality.
While encouraging, the continued improvement in audit quality has yet to become consistent across the market; strengthening firms’ underlying systems is therefore critical.
Alongside the review, the FRC has also released audit‑company metrics, intended to help users—particularly audit committees—evaluate how firms define and manage audit quality.
