ICAEW launches Constructive Engagement pathway for lower-level audit conduct matters

What is Constructive Engagement?

Constructive Engagement provides an alternative pathway for eligible audit conduct matters under investigation where formal disciplinary action may not be necessary to achieve the right regulatory outcome. It is intended for lower-level audit breaches where there is no significant risk of harm to the public, investors or any other third party, and no perceived damage to the reputation of, or trust in, the accountancy profession. 

The pathway enables firms and members to address root cause weaknesses, undertake relevant training and implement meaningful improvements to audit quality, without moving straight from investigation to full disciplinary proceedings. It is similar in spirit to the approach many firms will recognise from ICAEW Quality Assurance Department monitoring visits. 

Sarah Brook, ICAEW Director, Investigations, says the new route reflects ICAEW’s role as an improvement regulator: “Where a matter is genuinely lower level, the best regulatory outcome is often one that gets to the root of the issue quickly and puts effective improvements in place to prevent it happening again. Constructive Engagement gives us a structured way to do that, while keeping the public interest at the heart of the process.” 

Why has ICAEW introduced Constructive Engagement?

ICAEW began developing the new pathway in 2025 in response to several factors: the need for greater consistency between matters identified through monitoring reviews and those raised through complaints; the desire to align, where appropriate, with the Financial Reporting Council’s approach to lower-level audit matters; and increasing audit conduct case volumes. 

A review of historic audit cases indicated that approximately 18% of audit cases over the previous two years may have been suitable for Constructive Engagement. The analysis also showed that a more streamlined route would have freed up a significant amount of time for the investigation team and the Conduct Committee to focus on more serious or complex matters. 

“This is not about lowering standards,” says Sarah. “It is about using the most effective regulatory tool for the circumstances. For appropriate cases, a remediation agreement can secure practical improvements more quickly, while allowing disciplinary resources to remain focused on the matters that present the greatest risk.” 

Which audit conduct matters may be suitable?

Constructive Engagement is available only for lower-level audit conduct matters that meet ICAEW’s eligibility criteria. To be eligible for Constructive Engagement, the firm or individual must: 

• accept the allegations; 
• be willing to remediate the issue; 
• agree to pay relevant costs;
• not have had a matter resolved through Constructive Engagement in the previous two years; and 
• not be subject to active conditions or restrictions imposed by the Audit Registration Committee. 

This list provides an indication of the types of matters that may be suitable for Constructive Engagement, but ICAEW will consider each case on its individual merits. Where a matter is identified by ICAEW as potentially suitable, the firm or individual will be expected to provide a written root cause analysis and action plan. This will set out how the underlying issue arose, what action will be taken to address it, and how the effectiveness of those actions will be monitored. 

All Constructive Engagement remediation agreements will be scrutinised and, where appropriate, approved by the Audit Registration Committee. This independent oversight is a key safeguard in the process and helps ensure that outcomes remain robust, proportionate and aligned with the public interest. 

How does the process support audit quality?

The emphasis on root cause analysis is central to the new pathway. Rather than focusing only on the breach, Constructive Engagement requires firms and members to identify why the issue occurred and what needs to change to reduce the risk of recurrence. 

Remedial action may include targeted training, improvements to audit methodology, strengthened review procedures or a cold file review in the following year. The precise steps will depend on the facts of the case and the weaknesses identified. 

Ian Harmer, ICAEW Senior Manager, Audit Investigations Team adds: “Audit quality improves when firms learn from issues and make changes that are embedded in day-to-day practice. Constructive Engagement gives firms the opportunity to demonstrate that they understand what went wrong and have a credible plan to put it right.” 

What safeguards are in place to protect the public interest?

During development of the process, the ICAEW Regulation & Conduct Board considered how Constructive Engagement could operate within ICAEW’s current structures while preserving robust oversight. A particular focus was making sure that resolving appropriate matters outside of the formal disciplinary process would not dilute accountability or weaken public interest protection. 

The requirement for Audit Registration Committee approval, together with defined eligibility criteria and the need for accepted allegations and meaningful remediation, is intended to provide that assurance. Matters that do not meet the criteria, or where the subject does not engage with the process, will continue through the usual conduct route. 

Further information and resources

Firms and members may find the following ICAEW resources useful when considering the themes behind Constructive Engagement and audit quality improvement: 

• Constructive Engagement: a route for resolving lower-level audit conduct matters
• Audit monitoring reports and insights 
• Guidance on root cause analysis and remediation 
• ICAEW sanctions guidance 
• ICAEW Regulation & Conduct Annual Report