There will be a 2.5% increase in fees – levies - on the professional bodies and an overall 5% increase in the levies on preparers, ranging from 2.5% increase for those with a market capitalisation below £1bn up to 9.5% for market capitalisations greater than £1bn.

The highest levy will rise to approximately £66,000 for a company with a market capitalisation of around £100bn.

The overall funding requirement for 2017/18 will be £36m, up from £33.3m in 2016/17, and the FRC says its core costs will increase by 6.3% compared to the budget for 2016/17.

The spend for Audit Quality Review (AQR) has been slashed by £1.1m to £7.7m after spending £8.8m in 2016/17, going over budget by £1.5m.

According to the plan, the FRC will review around 155 individual audit engagements, plus reviews of firms’ wider arrangements in 2017/18. Priority sectors will be property, travel and leisure, financial services, and support services.

In the annual plan the FRC stated that during 2016/17, the FRC expects to spend £400,000 less than budgeted on audit review activities and has therefore reduce the 2017/18 funding requirement from the accountancy profession by that amount.

The FRC has increased the budget for investigations to £8.4m although the regulator underspent by £1.1m in 2016/17.

Staff costs account for 70% of FRC’s running costs and will increase by 7.5%, which the FRC says primarily reflects recruitment to discharge new responsibilities as the competent authority for audit regulation, and provide additional resource for work on corporate governance and enforcement. Staff pay will increase by 1.5% on average. Currently, the FRC has 176 employees.

The FRC has set the reserve at £700,000 representing 20% of operating costs. This is down from the £2m figure at year end 2016/17.

The FRC says it will spend £2.2m less that it budgeted for in 2016/17. Of this, £1m is because the regulator has spent less than originally forecast on accountancy and actuarial cases; and £1.2m results from efficiency savings.

The regulator expects to make further cuts of £500,000 in 2017/18, largely through greater use of online resources for recruitment and training, and more flexible working options. The highest levy will rise to approximately £66,000 for a company with a market capitalisation of around £100bn.  The total amount of the preparers levy for 2017/18 will be £14.8m.

Governance code review

The FRC has prioritised a review of the governance code and will be proactive in any EU related regulatory changes. It will make changes to improve the effectiveness of its enforcement and disciplinary role.

On the annual AQRs it is working towards reaching 90% of FTSE 350 audits requiring limited improvements as assessed by its monitoring function, and will also be implementing and monitoring a new framework of technical actuarial standards.

The areas of focus will be changes in auditor appointment, the audit of pension balances and disclosures, and the impact of currency fluctuations. The FRC says these have been selected based on the level of tendering activity, the low interest rate environment and the devaluation of sterling following the Brexit vote respectively.

It will also conduct thematic reviews in a number of areas. These are auditors’ responsibilities for areas of the annual report beyond the financial statements, including the audit of directors’ remuneration, and auditors’ reporting by exception on other matters such as risk management and viability statements; audit firm culture and governance, following the 2016 report on corporate culture; and materiality, in order to provide an update and explain developments in the last four years since the previous thematic review in this area.

Corporate reporting review work will also look at alternative performance measures, and monitor companies’ disclosures relating to new accounting standard disclosures (IAS 8).

Stephen Haddrill, CEO of the FRC, said: ‘Restoring public trust in business and ensuring the UK corporate sector is ready for Brexit is our priority.  Over the coming year, we will invest our resources into reviewing if after 25 years of the UK corporate governance code, changes need to be made.

‘We must continue to work hard to promote high quality reports, enhance audit quality and improve the speed and effectiveness of our enforcement activities.’

The FRC consulted on its draft plan and budget and levy proposals at the end of last year. Responses to that consultation are here.

The FRC’s Plan, Budget and Levies 2017/18 is here.