FRC strengthens audit quality with revised standards on assessing risks associated with non-compliance with laws and regulations

The changes signal a more explicit, risk-based expectation that audit teams identify the legal and regulatory framework relevant to an entity, evaluate compliance indicators, and document judgements with greater rigour. For financial services executives, the practical effect is likely to be earlier and deeper auditor challenge on regulatory compliance controls, breach reporting, and legal contingencies—particularly in banking, insurance, and listed companies where the regulatory perimeter is broad. Compliance teams should refresh their legal/regulatory inventory, evidence monitoring and remediation, and prepare to support auditors with clear NOCLAR risk assessments.

Audit committees should add NOCLAR to their agendas, confirm reporting channels and governance oversight, and ensure disclosures are robust. Audit firms need to update methodologies, templates, training and quality review procedures, with particular attention to sector-specific regimes such as financial crime, sanctions, consumer protection and prudential requirements. The revisions are not expected to create entirely new obligations for corporates, but they raise the bar on evidence and challenge.

Firms that treat the change as a governance improvement can reduce disruption, strengthen controls, and demonstrate better regulatory resilience.