[Global Financial Insights] FRC Issues Auditor Guidance | SEC Accepts FASB 2026 Taxonomies

Editorial Team – [2026] 184 Taxmann.com 373 (Article)

Global Financial Insights is a weekly feature for the Accounts and Audit Module subscribers of Taxmann.com. It provides you with the latest updates on financial reporting and auditing practices from across the globe. Here is this week’s financial update:

1. FRC Issues Interim Guidance for Safeguarding Auditors Following FCA’s New Supplementary Regime

The Financial Conduct Authority (FCA) has introduced a new Supplementary Regime for payment and e-money institutions, effective from 7th May 2026, with the objective of strengthening safeguarding practices and enhancing consumer protection. The regime places increased emphasis on robust recordkeeping, regular reconciliations and stronger governance frameworks, addressing gaps observed in existing safeguarding arrangements.

In light of these developments, safeguarding auditors will play a critical role in evaluating firms’ compliance with the enhanced requirements, particularly during the initial phase of implementation, when both legacy frameworks and new expectations coexist.

To support this transition, the Financial Reporting Council (FRC) has issued Interim Guidance on Payment and E-Money Safeguarding Assurance Engagements. The guidance aims to assist auditors in maintaining consistency and quality in assurance engagements, while exercising appropriate professional judgement in a changing regulatory environment.

The Interim Guidance outlines broad principles to help auditors plan and perform their work under the new regime. It is intended as a temporary measure until the FRC develops a dedicated safeguarding assurance standard, which is expected to be issued following public consultation in 2027. Further, the FRC has clarified that the guidance is non-mandatory in nature and does not introduce new requirements or override existing regulations such as the Electronic Money Regulations (EMRs), Payment Services Regulations (PSRs) or CASS 15. Instead, it serves as a practical reference point during the transition period.

Overall, the Interim Guidance acts as a transitional tool to help safeguarding auditors adapt to the FCA’s Supplementary Regime, supporting a consistent and high-quality approach until a formal assurance standard is introduced.

Source – Financial Reporting Council

2. FRC Issues Guidance to Improve Interpretation of Departures from Corporate Governance Code

The Financial Reporting Council (FRC) has released updated guidance on ‘comply or explain’ reporting to help investors and other stakeholders better interpret instances where companies choose not to follow specific provisions of the UK Corporate Governance Code.

Amid the ongoing reporting season, the FRC has clarified that departures from the Code should not automatically be viewed negatively. Instead, a clear, well-reasoned explanation may reflect a more thoughtful, tailored approach to governance, aligned with a company’s specific circumstances.

The guidance focuses on improving how such explanations are understood, encouraging users of financial statements to assess the quality and transparency of disclosures rather than relying solely on whether a company has fully complied with the Code. It highlights that meaningful explanations can provide deeper insight into how boards apply governance principles in practice.

The FRC has also drawn attention to a tendency among companies to report full compliance to avoid scrutiny, even where alternative approaches may be more appropriate. This has led to standardised disclosures that offer limited value to users. The updated guidance seeks to address this by promoting more informative and entity-specific reporting.

Looking ahead, the FRC will continue to monitor reporting practices and plans to share its observations on the quality of such disclosures in its upcoming annual corporate governance review.

Source – Financial Reporting Council

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