Richard Moriarty told the Sunday Times that the FRC needed to take disciplinary action against auditors more swiftly. He emphasised the importance of differentiating between significant failings and minor errors that don’t justify prolonged investigations.

The FRC may also consider being more lenient towards firms that voluntarily disclose audit issues. 

Moriarty said: “The way we want to look at enforcement is to really try to challenge the timeliness of enforcement cases.”

The changes to the watchdog come as industry regulators aim to meet the calls from Chancellor Rachel Reeves to support economic growth.

Moriarty urged that the FRC was seeking to find a middle ground between engagement and investigation, the Times reports. 

He said: “I’m really keen to see whether there are other interventions — other ways of dealing with the issue that lie between those two bookends.

“There will always be a need to have really robust, rigorous enforcement tools in the toolkit. But if that’s our only tool, it strikes me that actually we’re missing a trick. Is there a more proportionate and graduated set of interventions we can have that lie between us talking to firms about improving their procedures and a full-on investigation and enforcement case?”

He also indicated that the  FRC would be reviewing how it monitors auditing standards. Currently, the regulator’s Audit Quality Review selects several audits and evaluates how well they were conducted. 

The FRC would like to move towards greater reliance on examining a firm’s internal quality-management systems. 

He said: “What that does is hold the firm accountable more for its quality management and assurance, rather than only relying on us inspecting files.” 

Referring to the Sir John Kingman review in 2018 after a barrage of corporate failures resulting in audit failures, Moriarty concluded: “Now is a good time to look at our regulatory model and ask ourselves, what is the best model for 2028 and beyond, and not just 2018? I think it’s really important we never forget the lessons that John Kingman gave us in 2018. But neither should we be hostage to a particular point in time if the future demands something a little more evolved and sophisticated.”