SMF11 Chair of Audit Committee Hiring Guide

What Is the SMF11 Senior Management Function?

Senior Management Function 11 — the Chair of the Audit Committee — is the FCA-designated accountability for the independent oversight of a UK regulated firm’s financial reporting, internal audit function, and external audit relationship. The SMF11 holder is a Non-Executive Director who carries personal regulatory accountability, under the Senior Managers and Certification Regime (SMCR), for the effectiveness and independence of the audit committee’s governance of these functions.

This guide explains the SMF11 role in depth — the regulatory framework, what the Chair of the Audit Committee does in practice, what FCA pre-approval requires, what the candidate profile looks like, and how to run the search. It draws on the work Exec Capital does on regulated firm senior appointments and on the cross-portfolio relationship with our sister firm Accountancy Capital, which specialises in ACA and ACCA-qualified senior finance appointments, for the accounting depth that the SMF11 appointment requires.

The Chair of the Audit Committee is among the most technically demanding NED appointments in a regulated firm. The FCA’s expectation — and the UK Corporate Governance Code’s expectation — is that the Chair of the Audit Committee has genuine financial reporting and audit expertise, not simply general governance experience. A candidate who is a capable board member but lacks the technical accounting or audit background to meaningfully challenge the external auditor, the Finance Director, and the internal audit function will fail the FCA’s competence assessment and, more importantly, will fail to provide the governance oversight the role requires.

The Audit Committee’s Governance Role at a Regulated Firm

The audit committee at a UK regulated firm carries oversight accountability across four interconnected areas, each of which the SMF11 holder is personally accountable for under the SMCR.

Financial reporting integrity. The audit committee oversees the quality and accuracy of the firm’s financial reporting — annual accounts, half-year accounts, regulatory capital reporting, and any other financial information published to investors, regulators, or the market. The Chair is responsible for ensuring that significant judgments in the accounts — provisioning levels, goodwill impairment tests, going concern assessments, fair value measurements — are challenged robustly and are consistent with the firm’s actual financial position. At regulated firms, the financial reporting is scrutinised by both the FCA and, for dual-regulated firms, the PRA, which means that inadequate audit committee challenge creates regulatory exposure as well as investor risk.

External audit relationship. The audit committee oversees the appointment, independence, performance, and remuneration of the external auditor. This includes the tendering process for the audit appointment (FRC guidelines recommend competitive tender at least every ten years), the assessment of auditor independence when the audit firm provides non-audit services, and the audit committee’s response to the auditor’s findings — the management letter and any audit qualifications. The Chair of the Audit Committee has a private meeting with the external auditor at least annually, without management present, to discuss any concerns the auditor has that management would prefer not to raise in the committee.

Internal audit oversight. The audit committee oversees the internal audit function — its independence, its resourcing, its scope and plan, and the management’s response to internal audit findings. At firms without a dedicated internal audit function, the audit committee oversees whatever assurance arrangements serve an equivalent purpose. The independence of the internal audit function — both from the CFO to whom it may administratively report and from the management activities it is auditing — is a primary audit committee governance concern.

Risk management and internal controls. While the risk committee (SMF10) has primary oversight of the firm’s risk management framework, the audit committee has specific oversight of the internal control environment — the processes and systems that prevent and detect errors, fraud, and misstatement in financial reporting. At firms without a separate risk committee, the audit committee typically assumes broader risk oversight. The delineation of responsibility between audit and risk committees, where both exist, should be specified in the respective committees’ terms of reference.

The SMCR Framework and SMF11’s Prescribed Responsibility

SMF11 is one of the prescribed Non-Executive Director functions under the SMCR, sitting alongside SMF9 (Chair), SMF10 (Chair of Risk Committee), SMF12 (Chair of Remuneration Committee), and SMF14 (Senior Independent Director). The prescribed responsibility attached to SMF11 is oversight of the firm’s internal audit function. This is the formal regulatory accountability: ensuring that the firm has an adequate internal audit function (or equivalent assurance arrangements) and that the audit committee’s oversight of that function is effective and independent.

As with all SMCR prescribed responsibilities, the Statement of Responsibility for the SMF11 holder must accurately reflect this accountability. The SoR should be drafted with legal counsel’s input, reviewed by the compliance function, and presented to the candidate in its final form before the offer is made. Candidates with prior SMF experience will scrutinise the SoR carefully. The firm should also ensure the SoR is consistent with its Management Responsibilities Map — any overlap or ambiguity with the SMF10 Chair’s responsibilities (where a risk committee exists) or with any executive responsibility for internal audit oversight should be resolved before the application is submitted.

For the full SMCR framework and how SMF functions relate to each other, the SMF Roles: A Complete Guide is the foundational reference. For the SMF10 Chair of Risk Committee’s overlapping governance responsibilities, the SMF10 hiring guide provides the counterpart perspective.

The Chair of the Audit Committee and the External Auditor

The external auditor relationship is the most technically demanding aspect of the SMF11 role and the one that most clearly distinguishes a genuinely qualified Chair from a governance generalist in the position. The Chair needs to understand the audit process well enough to assess whether the external auditor is conducting a quality audit — not just a compliant one.

A quality audit is one where the auditor has genuinely challenged management’s judgments — probed the assumptions underlying provisions, tested the completeness of revenue recognition, assessed the going concern basis rigorously — rather than simply agreeing with what management has presented. An audit committee chair who cannot distinguish a challenging auditor from a deferential one is unable to fulfil the oversight function the role requires.

Specific areas where the Chair should be equipped to engage substantively with the external auditor include: the auditor’s assessment of the firm’s most significant accounting estimates and judgments; any Emphasis of Matter or material uncertainty paragraphs in the audit opinion; the auditor’s findings on internal controls over financial reporting; and the auditor’s independence from management — specifically whether any non-audit services provided by the audit firm could impair the auditor’s objectivity. The FRC’s UK Auditing Standards provide the technical framework within which the external auditor operates and which the Chair needs to understand.

The private meeting between the Chair and the external auditor — typically conducted annually, without management or executive directors present — is one of the most important governance mechanisms in the audit committee’s armoury. The auditor’s willingness to be candid in this meeting, and the Chair’s ability to draw out concerns that would not be raised in front of management, depends on the quality of the relationship and the Chair’s technical credibility.

Accounting Qualifications and the SMF11 Competence Requirement

The FCA’s competence assessment for SMF11 requires the Chair of the Audit Committee to have relevant financial reporting and audit expertise. The UK Corporate Governance Code sets out this expectation explicitly: the board should satisfy itself that at least one member of the audit committee has recent and relevant financial experience, and that the audit committee as a whole has competence relevant to the sector in which the company operates.

For most firms, the relevant qualification baseline is ACA (ICAEW), ACCA, or equivalent — specifically, a qualified accountant with post-qualification experience in financial reporting, audit, or equivalent financial governance roles. The ICAEW is the primary professional body for audit committee chair competence in the UK, and ICAEW guidance on audit committee effectiveness provides the most authoritative framework for assessing whether an SMF11 candidate is adequately equipped. Candidates without formal accounting qualifications but with deep experience of financial reporting governance at senior board level — a former CFO at a comparable firm, for example — may also meet the competence threshold, but should expect more detailed FCA scrutiny of their specific financial reporting expertise.

Our sister firm Accountancy Capital, which specialises in ACA and ACCA-qualified senior appointments, provides specific deep coverage of the SMF11 candidate pool with qualified accountant backgrounds. For firms where the SMF11 appointment will be made primarily on the strength of accounting credentials, Accountancy Capital’s network is directly relevant.

FCA Pre-Approval: The SMF11 Application

The SMF11 appointment requires FCA pre-approval, following the same Form A application process as other SMF functions. The FCA assesses the candidate on reputation, competence and capability, and financial soundness. For SMF11 specifically, the competence assessment will focus on financial reporting and audit expertise — the FCA will look for evidence that the candidate has the knowledge and experience to provide meaningful independent oversight of the firm’s financial reporting, internal audit function, and external auditor.

The application should include a clear narrative of the candidate’s financial reporting and audit experience — specific roles, specific responsibilities, specific examples of audit committee governance work. Candidates who present a strong general governance background without specific financial reporting depth will face questions about their SMF11 competence. Preparing the application narrative carefully — with the firm’s legal counsel — is as important as identifying the right candidate.

The FCA’s six-year regulatory reference requirement applies to SMF11 as to all SMF functions. Regulatory references from prior employers must be obtained and reviewed before the application is submitted. The timeline from application submission to approval is typically 12–16 weeks for a clean application. For the full FCA application process and regulatory reference requirements, the SMF Roles guide provides the comprehensive framework.

The SMF11 Candidate Profile

The Chair of the Audit Committee candidate pool at a UK regulated firm requires a specific combination of accounting expertise, audit committee experience, and regulatory firm governance knowledge that is genuinely scarce at senior NED level.

Professional accounting qualification. ACA, ACCA, or equivalent qualification is the standard expectation. The qualification provides the technical foundation for the financial reporting and audit challenge that the role requires. Candidates without formal qualification who have equivalent experience — former CFOs with extensive external audit management experience, for example — may be appropriate but require more detailed competence assessment and may face a longer FCA review.

Prior audit committee experience. Candidates who have served on or chaired audit committees at comparable regulated firms are the most directly qualified. Their familiarity with the committee process, the auditor dynamic, and the financial reporting governance requirements reduces the onboarding period and the governance risk in the early months.

Financial services sector knowledge. Regulated firm financial reporting — capital adequacy reporting, fair value measurement of financial instruments, provisioning for credit losses, insurance liability valuation — requires sector-specific accounting knowledge that is different from general corporate financial reporting. Candidates from non-financial services backgrounds will face a steeper technical learning curve and should be assessed carefully on their knowledge of the sector’s accounting and regulatory reporting specifics.

Independence. As with all SMF NED functions, genuine independence from management is a regulatory requirement. The independence criteria — no material relationship with the firm, no executive role within the past five years, no commercial relationship that could compromise judgment — must be assessed and documented before the appointment is offered.

Relationship with the CFO and Finance function. The Chair of the Audit Committee’s most important day-to-day relationship is with the Finance Director or CFO. The Chair needs to be able to engage substantively with the CFO’s financial judgments — providing genuine challenge without creating an adversarial dynamic that undermines the finance function’s effectiveness. The best Chair-CFO relationships are characterised by mutual respect and candour; the worst are characterised by either deference (the Chair accepts whatever the CFO presents) or conflict (the Chair’s challenge is perceived as personal rather than governance).

Where SMF11 Talent Comes From

The SMF11 candidate pool draws from three primary backgrounds. Former CFOs and Group Finance Directors at regulated firms who have transitioned to NED careers are the most directly qualified — they bring deep financial reporting knowledge, regulatory firm accounting experience, and an understanding of the CFO’s perspective that makes their audit oversight particularly effective. Retired or senior partners from audit practices — Big Four and major mid-tier firms who have led financial services audit teams — bring external audit expertise and technical accounting depth. And established audit committee NEDs from comparable regulated firms who are willing to take on an SMF-designated chair role at a new firm.

The cross-portfolio opportunity with Accountancy Capital is most directly relevant for the first group — former CFOs and Finance Directors with ACA/ACCA qualifications who are building NED portfolios. Accountancy Capital maintains one of the UK’s most comprehensive networks of ACA-qualified senior finance executives, many of whom are at the career stage where audit committee NED opportunities are the most attractive next step.

Running the SMF11 Search

SMF11 searches require the same regulatory due diligence framework as all SMF NED appointments: regulatory history review pre-shortlisting, independence assessment before offer, and Statement of Responsibility preparation with legal counsel before engagement. The specific additional dimension for SMF11 is the financial reporting and audit competence assessment — which should be a structured conversation, not just a credentials review.

The assessment conversation should include specific questions about: the candidate’s experience of managing the external auditor appointment and remuneration; a specific example of an audit committee challenge to a significant accounting judgment; the candidate’s approach to going concern assessments; and their experience of material internal audit findings and management’s response. These are concrete assessments of audit committee competence, not governance philosophy discussions.

Board chair and CEO involvement in the final stage assessment is essential, as for all SMF NED appointments. The SMF11 holder works within the board’s governance structure and needs the board chair’s genuine confidence as well as formal approval. Timeline is typically 20–28 weeks from search opening to the SMF11 holder being able to exercise their function, incorporating the search, offer, and FCA approval process.

Compensation and Time Commitment

SMF11 NED fees at mid-size regulated firms typically run from £50,000 to £90,000 per annum, reflecting the technical expertise required, the regulatory accountability carried, and the time commitment involved. The audit committee typically meets four to six times per year, with additional off-cycle meetings for significant accounting judgments, external auditor appointment reviews, or material internal audit findings. Preparation time — reviewing accounts, reading management letters, engaging with the CFO and external auditor outside formal meetings — adds materially to the time commitment. Total time demand is typically 30–40 days per annum for an active audit committee chair at a firm with a complex financial reporting environment.

Common Hiring Mistakes

1. Appointing a governance generalist without accounting depth. The most consequential SMF11 failure. A Chair who cannot provide genuine financial reporting challenge — who defers to the CFO’s judgment on significant accounting estimates, who is unable to assess the quality of the external audit, who does not understand internal control weaknesses — is providing an appearance of oversight without the substance.

2. Failing to assess sector-specific accounting knowledge. Regulated firm financial reporting is technically distinct from general corporate accounting. Candidates from non-financial services backgrounds should be assessed specifically on their knowledge of the sector’s accounting and regulatory reporting environment before being presented to the board.

3. Not engaging Accountancy Capital for ACA-qualified candidates. The SMF11 candidate pool with the most directly relevant credentials — ACA-qualified former CFOs and Finance Directors building NED portfolios — is Accountancy Capital’s primary network. A search that does not engage this population is systematically missing the strongest candidates.

4. Neglecting the auditor relationship dynamic. The Chair’s relationship with the external auditor is as important as the Chair’s relationship with the CFO. The assessment should probe the candidate’s approach to managing the auditor relationship, not just their accounting knowledge.

5. Rushing the application timeline. The FCA’s review of an SMF11 application — with its specific competence requirements — can take longer than a more standard NED SMF function where the FCA’s questions are primarily about regulatory history rather than technical competence. Building adequate time into the application plan prevents governance gaps.

How Exec Capital Approaches SMF11 Appointments

Exec Capital runs SMF11 searches with regulatory due diligence embedded from brief stage, a specific financial reporting competence assessment built into the process, and a cross-portfolio relationship with Accountancy Capital for candidates whose primary credential is ACA or ACCA qualification. The combination of Exec Capital’s regulated firm practice and Accountancy Capital’s qualified finance executive network provides the most comprehensive coverage of the SMF11 candidate population in the UK market.

Adjacent SMF NED appointments that frequently accompany or follow the SMF11 hire include the SMF10 Chair of Risk Committee, the SMF12 Chair of Remuneration Committee, and the SMF9 Chair. For the full board governance context, the Board Construction Guide and the existing Audit and Risk Committee Chairs guide provide broader governance framework context.

The Audit Committee’s Role in Emerging Risk and Technology Governance

The audit committee’s governance agenda has expanded in recent years to encompass technology and data risk dimensions that were not traditionally within its scope. This expansion reflects the increasing significance of technology to regulated firm financial reporting and the audit process, and the growing importance of data governance to the accuracy and completeness of the financial and regulatory information the firm produces.

Cyber security and the audit. A significant cyber incident can materially affect the firm’s financial statements — through direct losses, through regulatory fines, or through reputational damage that affects going concern. The audit committee should ensure that the external auditor is considering cyber risk as part of the audit’s risk assessment, and that the internal audit function has cyber security within its annual review scope. The Chair should be equipped to engage with the auditor on how cyber risk has been assessed and what audit procedures have been designed to address it.

Artificial intelligence in financial reporting. Regulated firms are increasingly using AI and machine learning in processes that feed into financial reporting — credit scoring models that determine provisioning levels, automated reconciliation tools, and AI-assisted regulatory return preparation. The audit committee’s oversight of internal controls over financial reporting needs to encompass these AI-driven processes: what are the controls over the models, how are model outputs validated, and what is the audit trail for AI-assisted calculations? The FCA and the FRC have both begun to articulate expectations on AI governance in audit contexts, and the SMF11 Chair should be developing their understanding of these expectations proactively.

Data quality and regulatory reporting. For FCA-regulated firms, regulatory returns — capital adequacy reports, liquidity reports, and ICAAP documentation — are financial documents with the same governance implications as statutory accounts. The audit committee’s oversight of the internal control environment should encompass the data quality processes that underpin regulatory reporting, not just the statutory accounts. Regulatory reporting failures — inaccurate or late returns — can trigger FCA supervisory engagement and, in serious cases, enforcement action. The SMF11 Chair is not directly accountable for regulatory reporting (that accountability typically sits with the CFO or a named executive SMF holder), but the audit committee’s oversight of the control environment extends to the systems and processes that produce regulatory outputs.

The Audit Committee’s Annual Effectiveness Review

Best practice governance requires the audit committee to conduct an annual effectiveness review — an assessment of whether the committee is functioning as intended and whether it is providing the oversight quality that the firm’s governance requires. The FRC’s Guidance on Audit Committees recommends that this review should be conducted by the committee itself, supplemented periodically (at least every three years at major firms) by an external review.

The annual review should assess: the quality of the information the committee receives from management and the external auditor; the committee’s process for challenging significant accounting judgments; the effectiveness of the private meeting with the external auditor; the quality of the internal audit function’s work; and the committee’s own composition — specifically, whether it has the financial expertise and sector-specific knowledge it needs. The Chair is responsible for leading this review and for presenting its conclusions to the full board.

Where the review identifies gaps — in the committee’s expertise, in the quality of management information, or in the external auditor’s challenge — the Chair is responsible for ensuring these are addressed. This might mean recruiting a committee member with specific expertise the current committee lacks, requesting improved reporting from management, raising auditor performance concerns formally, or recommending an external review of the audit arrangement.

Onboarding the SMF11 Chair

The Chair of the Audit Committee’s onboarding should begin with a structured financial deep-dive before the first board or committee meeting. The pre-appointment briefing should include: the most recent annual accounts and the external auditor’s management letter; the internal audit plan and the most recent internal audit reports; the current list of significant accounting judgments and the management’s approach to each; the audit committee’s terms of reference; and any outstanding Charity Commission, FCA, or PRA correspondence relating to financial reporting or audit matters.

The Chair should also have a one-to-one meeting with the outgoing Chair (where one exists) to understand the history of key accounting judgments, the external auditor relationship, and any audit committee concerns that are ongoing. This knowledge transfer prevents the new Chair from discovering in their first committee meeting that a significant issue has been brewing for 18 months without any background context.

The Chair’s first interaction with the external auditor — preferably before the first committee meeting — should be substantive: a conversation about the auditor’s current risk assessment of the firm, their planned audit approach, and any concerns they have about the control environment that they want the new Chair to understand. This conversation establishes the relationship and ensures the Chair has the context they need to lead the first committee meeting effectively.

The Audit Committee and External Audit Market Reform

The UK audit market has been the subject of sustained regulatory reform following a series of high-profile corporate failures — Carillion, Patisserie Valerie, BHS — where the audit function was seen to have failed to provide the independent assurance that investors and other stakeholders relied upon. The Competition and Markets Authority’s audit market study and subsequent reforms have changed the governance environment within which audit committee chairs operate.

The primary reforms relevant to the audit committee chair include: the mandatory joint audit requirements for FTSE 350 companies (paused but still under policy consideration), the enhanced requirements on operational separation between audit and non-audit services at the Big Four firms, and the reforms to the auditing profession’s regulator — the replacement of the FRC with a new, more powerful Audit, Reporting and Governance Authority (ARGA). The audit committee chair at a regulated firm needs to be current on these reforms and their implications for how the audit relationship is managed and how the external audit is assessed.

The FRC’s revised UK Corporate Governance Code (2024 revision) introduced enhanced requirements for boards and audit committees on internal controls reporting — specifically, a requirement for boards to make an explicit statement on the effectiveness of the company’s material controls (financial, operational, and compliance). This requirement — which moves the UK framework closer to the US Sarbanes-Oxley regime on internal controls — places additional governance accountability on the audit committee chair and requires the audit committee to maintain a more rigorous assessment of internal control effectiveness than many have historically provided.

Common Questions About the SMF11 Appointment

Can the board chair also chair the audit committee? The UK Corporate Governance Code explicitly states that the board chair should not chair the audit committee; the two roles have different governance purposes and the audit committee’s independence from the board chair is important for its effectiveness as an oversight body. FCA-regulated firms should treat this as a governance best practice requirement rather than a matter of preference.

What is the minimum size for an effective audit committee? The Code recommends at least three independent NEDs on the audit committee. At smaller regulated firms, a two-member committee with a strong Chair can function effectively, but the resilience of the oversight is limited if one member is absent or has a conflict of interest in a specific matter. Firms should plan for three members as the governance standard.

How often should the audit committee meet? A minimum of four meetings per year — aligned with the quarterly reporting and the year-end audit cycle — is the standard minimum. Firms with complex financial reporting environments, active M&A activity, or significant regulatory financial reporting obligations may need additional meetings. An exceptional meeting can always be called for a specific matter; the challenge is ensuring the regular cadence provides adequate oversight rather than leaving governance to accumulate between meetings.

What happens when the external auditor identifies a significant issue? The audit committee chair is typically the first board contact for a significant audit finding — a material misstatement, an internal control deficiency, or a qualification or emphasis of matter in the audit opinion. The Chair needs to be available and accessible when such issues arise, and must be capable of forming an independent view on the significance of the issue and the adequacy of management’s response before presenting it to the full board. This reactive governance function is one of the most important and least predictable aspects of the role.

Further Reading and Authoritative Sources

The FRC Guidance on Audit Committees is the primary reference for UK audit committee best practice, covering the audit committee’s role, composition, processes, and relationship with the external auditor. The UK Corporate Governance Code sets out the board-level expectations for audit committee governance at listed companies that FCA-regulated firms are expected to follow.

The ICAEW Audit Quality resources for audit committee members provide practical guidance on how audit committee chairs can assess the quality of the external audit — one of the most technically demanding aspects of the SMF11 role. The FCA’s SMCR guidance and the prescribed responsibilities framework set out the specific regulatory accountability that the SMF11 holder carries.

For the accounting standards applicable to UK regulated firm financial reporting, IFRS Standards — particularly IFRS 9 (Financial Instruments), IFRS 17 (Insurance Contracts), and IAS 1 (Presentation of Financial Statements) — are the primary technical references for the financial reporting judgments that the audit committee oversees. The ACCA audit committee research provides broader context on how audit committees are evolving in the current governance environment.

Related Exec Capital guides: SMF Roles: A Complete Guide · SMF10 Chair of Risk Committee · SMF12 Chair of Remuneration Committee · SMF9 Chair Hiring Guide · Financial Services Executive Hiring · Audit and Risk Committee Chairs Guide