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Enhancing Public Accountability: Key Elements of the Public Office (Accountability) Bill 2025
Kirsty Cook
Yesterday the FRC launched the pithily-titled “Scalebox” initiative to help smaller firms which carry out audits in the Public Interest Equity (PIE) market. Firms within Tier 2 and Tier 3 for FRC Supervision and those firms which intend to enter the PIE audit market can now join the Scalebox to receive additional guidance from the FRC.
We’re glad to see that the FRC has recognised the difficulties which can be faced by smaller firms and those entering the PIE market in meeting regulatory expectations, and is taking practical steps to provide help and support.
What help is offered?
The FRC has described the Scalebox as a “flexible mechanism” whereby its dedicated team will engage with suitable firms and provide “bespoke feedback” “in areas where they need most help”. This may include:
- Reviewing and providing feedback on aspects of completed audits;
- Assessing a particular element of a firm’s system of quality control;
- For firms which have adopted, or plan to adopt the Audit Firm Governance Code, reviewing the firm’s actual or planned governance processes.
A safe space?
To firms which might feel nervous at the thought of engaging with the regulator in case their systems and processes are not quite up to scratch, the FRC has said that (subject to certain exceptions), the Scalebox will be a “safe space” for firms to obtain its input, without information being shared with other parties.
Unsurprisingly, if the Scalebox team discover issues within a firm which they deem to require disclosure in the public interest (such as breaches of the Recognised Supervisory Body’s Code of Ethics) they will pass these on to the relevant team (such as the RSB’s disciplinary team). However, in our view, this shouldn’t deter suitable firms from joining the Scalebox. If there are serious issues these are likely to be unearthed at some point, and taking the proactive step of engaging with the FRC to seek to make improvements will be a mitigating factor which the relevant team should take into account when considering the deficiencies.
Not hand-holding
The FRC has, however, made it clear that there are limits to the help that will be provided. The Scalebox team is there to point firms in the right direction, not to hold their hands.
For example, the Scalebox won’t be involved in a specific audit before it is completed and archived, and won’t provide ‘pre-clearance’ for any audit or quality management system. Equally, the FRC will not be prescriptive in terms of the improvements which should be made but will instead identify areas which could be developed and share good practices.
To underline the fact that compliance will remain the firm’s responsibility, the FRC requires each firm to demonstrate in its application to join the Scalebox that: “improving audit quality is a primary objective for the firm and that the firm is prepared to make the necessary investment”.
Whether this initiative will be effective in practical terms remains to be seen, but it is an encouraging development. Hopefully its inception will lead to small and medium sized firms getting the help they need and deserve to meet the FRC’s expectations which will, in turn, contribute to the much desired diversification in the PIE audit market.
FURTHER INFORMATION
If you have any questions or concerns about the content covered in this blog, please contact Julie Matheson, Lucy Williams or a member of the Regulatory team.
ABOUT THE AUTHORS
Julie Matheson is a partner in the Regulatory Team. Her expertise lies in advising professionals and professional services firms, particularly in the accountancy, audit and built environment sectors, on regulatory compliance, investigations and enforcement proceedings.
Lucy Williams is Legal Counsel in the Regulatory Department with a particular specialism in legal, healthcare and financial regulation. In her defence practice Lucy represents regulated professionals and organisations facing professional disciplinary proceedings, including law firms, solicitors, barristers, doctors, nurses, psychotherapists and teachers.
We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
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