Glossary

Published: 3 October 2023

7 minute read

Read the definition of terms we use on this site and within our publications.

Glossary

Term	Meaning
ACCA	The Association of Chartered Certified Accountants.
Accountancy Scheme	A contractual arrangement between the FRC and the accountancy professional bodies that provides for the FRC to investigate (and take enforcement action against) their members in cases that raise important issues affecting the public interest in the UK.
Actuarial Scheme	A contractual arrangement between the FRC and the actuarial professional body that provides for the FRC to investigate (and take enforcement action against) actuaries in cases that raise important issues affecting the public interest in the UK.
AEP	The Audit Enforcement Procedure, which is the process under which the FRC can investigate Statutory Auditors and audit firms in relation to audits of PIEs, large AIM-listed companies and Lloyd’s Syndicates for breach of a Relevant Requirement.
AFS	Audit Firm Supervision.  This team is responsible for the overall supervision of the audit firms, drawing together the results of work undertaken by  Audit Market Supervision (AMS) and Audit Quality Review (AQR) as well as other areas of the FRC.
AER	The FRC’s Annual Enforcement Review.
AIM	Alternative Investment Market.
AQR	The FRC’s Audit Quality Review team. This team is responsible for monitoring the quality of the audit work of Statutory Auditors and audit firms in the UK that audit PIEs and certain other entities within the scope retained by the FRC.
ARGA	Audit, Reporting and Governance Authority.
Audit firm	The sole practitioner, partnership, limited liability partnership or other corporate entity engaged in the provision of audit services.
Audited entity	Entity whose financial statements are subject to audit by the audit firm.
Auditor	Auditor refers to the person or persons conducting the audit, usually the Audit Engagement Partner or other members of the engagement team, or, as applicable, the firm.
BEIS	Department for Business, Energy and Industrial Strategy.  BEIS existed until 2023 when it was split to form the Department for Business and Trade (DBT), the Department for Energy Security and Net Zero (DESNZ) and the Department for Science, Innovation and Technology (DSIT).
Big Four	The four largest accounting firms – Deloitte, EY, KPMG and PwC.
Big Seven	The Big Four accounting firms, plus GT, BDO and Mazars.
Brydon Review	The independent review led by Sir Donald Brydon into how the audit process and product could be developed to better serve the needs of users and the wider public interest.
CA	Case Assessment. This team is responsible for gathering intelligence and conducting initial enquiries on cases arising under the AEP, the Accountancy Scheme or the Actuarial Scheme.
CAI	Chartered Accountants Ireland.
CEE	Case Examination and Enquiries team. From 1 April 2023, the Case Examiner and CEE became a separate team within AFS in the Supervision Division and has been renamed Case Assessment (CA).
CIMA	The Chartered Institute of Management Accountants.
Client Asset Reports	Annual reports on client assets required by the FCA.
CMA	Competition and Markets Authority.
CMA Review	The Statutory audit services market study published by the CMA in April 2019.
Conduct Committee	The Conduct Committee is a subcommittee of the FRC that decides whether to open investigations under the enforcement schemes and AEP, and performs an oversightrole in relation to the FRC’s enforcement work. It is also the body responsible for making decisions about publication of certain case-related matters and issuing guidance.
Constructive Engagement	A process introduced by the AEP for resolving cases with an audit firm where the audit quality concerns do not necessarily warrant a full enforcement investigation.
CRR	The FRC’s Corporate Reporting Review team reviews directors’ reports and accounts of public and large private companies for compliance with the law. It also keeps under review interim reports of all listed issuers and annual reports of certain other non-corporate listed entities.
DBT	Department for Business and Trade
Decision Notice	A document served in an AEP investigation by Executive Counsel, the Tribunal or Appeal Tribunal (as relevant) that sets out the breaches of Relevant Requirements by the Respondent, sanctions and an amount payable in respect of Executive Counsel’s costs. The Decision Notice may take the form of a Proposed or Final and/or Settlement Decision Notice, depending on the stage of the case.
Engagement partner	The Partner or other person in the firm who is responsible for the engagement and its performance, and for the report that is issued on behalf of the firm, and who, where required, has the appropriate authority from a professional, legal or regulatory body.
Engagement quality control review partner or EQCR	A Partner, other person in the firm, suitably qualified external person, or a team made up of such individuals, none of whom is part of the engagement team, with sufficient and appropriate experience and authority to objectively evaluate the significant judgements the engagement team made and the conclusions it reached in formulating the report.
Formal Complaint	A document issued at the end of an Accountancy Scheme investigation that sets out the alleged Misconduct.
FRC	Financial Reporting Council.
FRC Review	The independent review of the FRC led by Sir John Kingman, which was published in December 2018.
IAASB	The International Auditing and Assurance Standards Board.
IASB	The International Accounting Standards Board.
ICAEW	The Institute of Chartered Accountants in England and Wales.
ICAS	The Institute of Chartered Accountants of Scotland.
IFoA	The Institute and Faculty of Actuaries.
IFRS	The International Financial Reporting Standards issued by the International Accounting Standards Board.
Independent Reviewer	An independent lawyer (a current or former member of the judiciary, a barrister, an advocate or a solicitor) who is appointed by the Convener in an AEP investigation to consider and approve a Proposed Decision Notice orProposed Settlement Decision Notice, following agreement of the Respondent. A similar role is performed by an appointed individual in an Accountancy or Actuarial Scheme case.
IR	Investigation Report. Under the AEP, this report is served on the respondent at the end of an investigation and sets out the Allegations against the respondent, the Relevant Requirements that appear to have been breached, and summarises the evidence and documents obtained over the course of the investigation.
ISAs	International Standards on Auditing (UK), which are based on standards issued by the International Auditing and Assurance Standards Board. These form part of the Relevant Requirements that apply to Statutory Audit work.
KPI	Key performance indicator.
Member	A member of any of the bodies that participate in the contractual arrangement of the Accountancy or Actuarial Schemes, or a person who is subject to the systems of discipline, professional conduct and regulation of any such body.
Member Firm	A firm that is subject to the systems of discipline, professional conduct, and regulation of any of the bodies that participates in the contractual arrangement of the Accountancy or Actuarial Schemes.
Misconduct	An act or omission, or series of acts or omissions, by a Member or Member Firm in the course of their or its professional activities (including as a partner, member, director, consultant, agent, or employee in or of any organisation, or as an individual) or otherwise, which falls significantly short of the standards reasonably to beexpected of a member or Member Firm or has brought, or is likely to bring, discredit to the member or the Member Firm or to the accountancy profession.
Misstatement	A difference between the reported amount, classification, presentation, or disclosure of a financial statement item and the amount, classification, presentation, or disclosure that is required for the item to be in accordance with the applicable financial reporting framework.
Non-audit work	Any engagement in which an audit firm provides professional services to an audited entity, its affiliates or another entity where the subject matter of the engagement includes the audited entity and/or its significant affiliates other than the audit of financial statements of the audited entity.
Objectivity	Acting and making decisions and judgements impartially, fairly and on merit (having regard to all considerations relevant to the task in hand but no other), without discrimination, bias, or compromise because of commercial or personal self-interest, conflicts of interest or the undue influence of others, and having given due consideration to the best available evidence.
Participants in the Accountancy Scheme	Participants in the Accountancy Scheme that are not also RSBs are: the Chartered Institute of ManagementAccountants (CIMA) and the Chartered Institute of Public Finance & Accountancy (CIPFA).
Partner	Any individual with authority to bind the firm with respect to the performance of a professional services engagement.
PFC	A Proposed Formal Complaint, which is a draft of a Formal Complaint setting out the alleged Misconduct following an Accountancy or Actuarial Scheme investigation. Under the Accountancy Scheme, a Respondent has eight weeks to make representations in response to the PFC. Afterconsidering these representations, the FRC may finalise the Formal Complaint.
PIEs	Public Interest Entities. These are: (a) An issuer whose transferable securities are admitted to trading on a UK regulated market16; (b) A credit institution within the meaning of Article 4(1)(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council17, which is a CRR firm within the meaning of Article 4(1)(2A) of that Regulation; (c) A person who would be an insurance undertaking as defined in Article 2(1) of Council Directive 91/674/EEC of 19 December 1991 of the European Parliament and of the Council on the annual accounts and consolidated accounts of insurance undertaking as that Article had effect immediately before exit day, were the United Kingdom a Member State. No other entities have been specifically designated in law in the UK as 'public interest entities'.
Professional accountant	For the purpose of the ISAs (UK) and the FRC’s Ethical Standard, professional accountants are those persons who are members of a professional accountancy body, whether in public practice (including a sole practitioner, partnership or corporate body), industry, commerce, the public sector or education.
Professional scepticism	An attitude that includes a questioning mind, being alert to conditions that may indicate possible misstatement due to error or fraud, and a critical assessment of evidence.
Relevant ethical standards	In the UK the firm and its personnel are subject to ethical requirements from two sources: the FRC’s Ethical Standard concerning the integrity, objectivity and independenceof the firm and its personnel, and the ethical standards established by the auditor or assurance practitioner’s relevant professional body.
Relevant Requirement	A requirement with which a Statutory Auditor must comply. The Relevant Requirements include those set out in:SATCAR;the Audit Regulation (537/2014/EU);the ISAs; andthe FRC’s Ethical Standard.
RNS	Regulatory News Service: a regulatory and financial communications channel managed by the London Stock Exchange for companies to communicate with the professional investor.
RSB	Recognised Supervisory Bodies (RSBs) are: the Institute of Chartered Accountants in England and Wales (ICAEW), the Institute of Chartered Accountants of Scotland (ICAS),Chartered Accountants Ireland (CAI) and the Association of Chartered Certified Accountants (ACCA).
SATCAR	The Statutory Auditors and Third Country Auditors Regulations 2016/649.
Schemes	The Accountancy Scheme and Actuarial Scheme.
Statutory Audit	An audit performed pursuant to the EU Audit Directive and Regulation or otherwise designated by national law as a Statutory Audit, which in the UK is an audit of financialstatements or consolidated financial statements required by the Companies Act 2006 (as amended).
Statutory Auditor	A person appointed as an auditor under the Companies Act 2006 who is approved by or on behalf of the FRC to carry out Statutory Audits.
Sufficiency (of audit evidence)	The measure of the quantity of audit evidence. The quantity of the audit evidence needed is affected by the auditor’s assessment of the risks of material misstatement and also by the quality of such audit evidence.
Tribunal	The panel appointed in order to conduct hearings where Executive Counsel has decided to take enforcement action against the subject of an investigation. Tribunals are formed of former auditors, lawyers and lay persons. An Appeal Tribunal may also be appointed to hear the appeal of an interim or final decision made by a Tribunal.