Monthly Audit and Accountancy Round‑Up: A Busy Month for the FRC and New Guidance Across Education and Housing
March and early April have delivered a notably busy run of announcements for the Financial Reporting Council (FRC), alongside important new accounting and audit developments in the education and housing sectors.
With a clear emphasis on proportionality, innovation and engagement, this month’s updates give a useful sense of the direction of travel for regulators and standard‑setters alike.
A Busy Month for the FRC
The FRC has been particularly active, with a cluster of announcements which, together, paint a picture of a regulator seeking to balance robust oversight with practical support for the profession.
A key theme has been proportionality for smaller organisations. The FRC announced a package of measures aimed at supporting small business growth, signalling an intention to ensure regulatory expectations do not unduly hinder innovation or scale‑up ambitions. This includes Practice Note 28, a new guidance document aimed at providing practical advice on how firms can proportionally apply the existing ISAs to audits of Less Complex Entities (LCE). This is reinforced by the launch of a new SME discussion forum for FRS 102 preparers, designed to create a direct channel for smaller firms and finance teams to raise issues, share experiences and influence future guidance.
Change is also under way in audit supervision. The FRC set out its evolved approach, reflecting lessons learned from recent inspection cycles and the need for a more forward‑looking, risk‑based model. The emphasis is on earlier engagement and clearer feedback, with the aim of driving continuous improvement rather than retrospective criticism.
Alongside these structural developments, the FRC also launched consultations calling for views on the IAASB’s ISA for LCEs (as part of a wider conversation around how the regulator can help UK based SMEs access the audit market) and a re-consultation of proposed revisions to ISA 250 and 270. Both consultations run until 21 May 2026.
Finally, the FRC continued to lean into the topic of technology with new guidance on the use of emerging AI technologies in audit. Rather than being prescriptive, the guidance focuses on principles, governance and risk management, encouraging innovation while making clear that accountability, professional judgement and audit quality remain paramount.
New Accounting and Audit Guidance Across Education and Housing
Beyond the FRC’s own announcements, there have also been significant sector‑specific updates, particularly for education and housing bodies.
In the education sector, updated Academies and College Accounts Directions have been issued, setting out revised financial reporting and assurance requirements for the coming year. While the core framework remains familiar, the updates reinforce expectations around regularity, transparency and consistency, all areas which continue to attract close scrutiny from funders and regulators. Finance teams will want to ensure early engagement with these changes to avoid last‑minute reporting pressures.
Meanwhile, registered providers and advisers in the housing sector will be digesting the publication of the updated Housing SORP 2026, effective for periods beginning on or after 1 January 2026 (though early adoption is permitted). This update reflects ongoing developments in accounting standards and sector practice, and provides important clarity ahead of future reporting periods. As always, the practical implications will vary between organisations, but early planning and discussion with auditors will be key.
AML update
There has been much speculation across the industry about the exact form the proposed transfer of regulatory responsibility for the supervision of Anti-Money Laundering (AML) activities from the ICAEW to the Financial Conduct Authority (FCA). Whilst the current supervisory bodies, such as the ICAEW, continue to engage with the FCA on the transfer, there is no confirmed model for how the new system will work. However, the government has laid a new Statutory Instrument before parliament, expected to come in to force in summer 2026.
This brings forth changes to enhanced due diligence (EDD) procedures (which will now only be mandatory in regard to ’black’ listed countries), refinements to the definition of ’complex and large’ transactions with a view to reducing the admin burden on organisations and simplifying the rules around thresholds and other compliance procedures. Regardless of the regulatory future of AML activities, firms need to stay abreast of current legislation and ensure their internal processes remain compliant.
Looking Ahead
Taken together, this month’s FRC developments highlight a regulator actively engaging with stakeholders and responding to a complex operating environment. The emphasis on proportionality, dialogue and forward‑looking guidance is notable, particularly for smaller firms and sector‑specific entities navigating ongoing change. As ever, practitioners in the not-for-profit space will need to carefully review the new frameworks and ensure their processes and methodology remain compliant.
As these initiatives start to bed in, the challenge for organisations will be turning guidance into practical action, while keeping one eye on the next wave of consultations and reforms. Mercia is here to help, as ever. Please get in touch to find out how we can help with these latest developments, and to view our full range of resources to support accountants and auditors operating in the SME and not-for-profit sectors.