• Leading trade bodies call for proportionate reforms to audit and reporting rules. 
• Proposals would streamline regulation for audit of financial services, listed companies and large private entities. 
• Risk-based approach would support resilience and competition without compromising quality or trust.

The Association of Financial Mutuals (AFM), the Building Societies Association (BSA), the Quoted Companies Alliance (QCA), and UK Finance have today jointly published "Audit for Growth: Proportionality in Audit and Reporting", a new policy paper outlining proposals to modernise the UK’s audit regime. 

The four trade bodies collectively represent over 1,500 firms across financial services and capital markets. They say smarter audit regulation is essential to unlock competition, choice, investment and growth — while continuing to uphold trust in financial reporting.

The current rules treat all Solvency UK, banks, building societies, and Main Market listed firms, as well as some financial mutuals, as Public Interest Entities (PIEs), regardless of size or complexity. This blanket approach results in disproportionately high audit costs and limited choice of providers for most PIEs, with significantly increased regulatory pressure for smaller and mid-sized audit firms. 

The joint policy paper sets out a call for a simpler, size-based threshold for Public Interest Entity (PIE) status to capture truly large and systemically important entities alongside a more proportionate framework for audit and reporting. It outlines six key recommendations, including retiring the Other Entities of Public Interest (OEPI) regime, abandoning proposals for managed shared audits for FTSE 350 firms, streamlining reporting requirements, and rethinking earlier proposals for directors’ accountability.

Andrew Whyte, CEO of the Association of Financial Mutuals has said:

“Implementing a proportionate audit regime will help to address problems of cost and competition in the audit market for small and medium firms. For many of our members, this distortion of the audit market is one of the barriers to growth and tackling it will be one step towards achieving the government’s aspiration to double to size of the mutual sector.”

Robin Fieth, CEO of the Building Societies Association has said:

“Bringing proportionality to hundreds of unnecessarily complex audits will benefit all audited entities through immediately supporting competition and capacity in the audit market.” 

James Ashton, CEO of Quoted Companies Alliance has said:

“We have previously highlighted grave concerns over the availability and affordability of audit services and how quoted companies’ growth potential is being stifled as a result.

“This report goes further, highlighting how a whole range of organisations are over-burdened and under-served. Today we collectively make the case for a simpler reporting regime that will boost the UK economy without sacrificing trust or confidence.”

Eric Leenders, Managing Director of Personal Finance and Prudential, Reporting and Taxation, at UK Finance has said: 

“Audit reform should help UK businesses grow and compete, without being overly complex. By focusing on smarter, simpler reporting and a more proportionate approach to corporate governance and audit, we can unlock competition and investment to benefit the economy as a whole.” 

The full policy paper is available here. The paper has been submitted ahead of the Government’s publication of the draft Audit Reform and Corporate Governance Bill, announced in the King’s Speech.

[ENDS]

Press contacts:

Katie Wise - katie.wise@bsa.org.uk

Tanya Jackson - tanya.jackson@bsa.org.uk

Notes to Editors:

1. The six recommendations in the policy paper are as follows:
   1. Reform the scope of the PIE regime
   2. Retire the OEPI regime
   3. Review the FRC’s and ARGA’s supervisory approach
   4. Abandon managed shared audit
   5. Reconsider the proposals for directors’ accountability and enforcement
   6. Streamline and smarten reporting requirements
2. The Association of Financial Mutuals is the trade body that represents mutual and not-for-profit insurers, friendly societies and other financial mutuals across the UK. A financial mutual is an organisation that supplies financial services products, and which is owned by its customers, or members. That means there are no shareholders to pay dividends to or account to, and a mutual can concentrate entirely on delivering products and services that best meet the needs of its customers.
3. The Building Societies Association (BSA) represents all 42 UK building societies, including both mutual-owned banks, as well as 7 of the largest credit unions. Building societies have total assets of almost £525 billion and together with their subsidiaries, hold residential mortgages of over £395 billion, 24% of the total outstanding in the UK. They also hold £399 billion of retail deposits, accounting for 19% of all such deposits in the UK. With all of their headquarters outside London, building societies employ around 52,300 full and part-time staff.  In addition to digital services, they operate through approximately 1,300 branches, holding a 30% share of branches across the UK.
4. The Quoted Companies Alliance champions the UK’s community of 1000+ small and mid-sized publicly traded businesses and the firms that advise them. We believe the public markets can be the best place for companies to source the funds to grow, operate transparently and distribute wealth, fairly. The QCA seeks to inform policy in dialogue with regulators and government, showcase the latest thinking on leadership, investment, technology and governance through our events and research, and provide a forum to share good practice among our members, who are quoted on the Main Market, AIM and the Aquis Stock Exchange. Informed by our seven Expert Groups drawn from the membership, we campaign to ensure that regulation is proportionate, while maintaining the necessary protections for investors.
5. UK Finance is the collective voice for the banking and finance industry. Representing around 300 firms across the industry, we act to enhance competitiveness, support customers and facilitate innovation.