Newswire September 2025

AUDIT & ACCOUNTANCY 

FRC provides much needed clarity on related party disclosures for small entities 

A number of changes to Section 1A of FRS 102 take effect from 1 January 2026. Where previously small entities were only required to disclose material related party transactions, the 2024 Periodic Review amendments expanded the scope of these requirements, obliging entities to report most related party transactions from 2026 onwards. The amendment aimed to reduce the level of judgement involved in ensuring a complete set of disclosures.  

However, some confusion had been noted with regards to requirements relating to disclosure of compensation of key management personnel. The Financial Reporting Council’s (FRC) clarification – which can be found on its updated FRS 102 webpage – clarifies that, whilst transactions with directors which fall outside of the scope of key management personnel compensation (such as loans or other transactions which do not relate to compensation) are required to be disclosed, small entities are not specifically required to disclose director remuneration.  

ICAEW provides updated guidance on auditing groups 

As auditors are increasingly working on financial statements relating to periods captured by the revised ISA 600 Special Considerations – Audits of Group Financial Statements (Including the Work of Component Auditors), the ICAEW has issued a timely update to its key guidance for auditors working on group engagements. The key change auditors need to be aware of is the removal of the significant versus non-significant component classification and therefore the introduction of a requirement to perform fully risk-based scoping for all components at the planning stage.  

With many firms typically defaulting to predetermined scoping decisions based on component size, the revised standard aims to end this practice and introduce a zero base approach, recognising the possibility that material misstatements at the group level can arise from components of any size. The regulator’s revised guidance will therefore be useful to practitioners working with groups who are not yet carrying out a fully risk based approach.  

IAASB issues Narrow Scope Amendments to various assurance standards in order to align with IESBA on public interest and listed entity definitions 

The International Auditing and Assurance Standards Board (IAASB) has released a number of narrow scope amendments to some of its standards in response to revisions to the definition of listed entities within the International Ethics Standards Body for Accountants’ (IESBA) Code of Ethics. The revisions will impact the International Standards on Quality Management (ISQMs), various International Standards on Auditing (ISAs) and enhance the requirements of International Standard on Review Engagement 2400 (Revised), Engagements to Review Historic Financial Statements in relation to public disclosure of consideration and application of independence requirements in certain circumstances. Note, the narrow scope amendments will not directly impact the UK market but will be relevant to practitioners working in international markets.  

FRC launches Scalebox program with a view to build capacity in small UK firms and the PIE market 

With a view to supporting the growth and capacity of smaller firms and improving the number of providers in the public interest entity (PIE) and other regulated markets, the FRC has launched its Scalebox initiative, a programme in which the regulator will work with smaller providers to enhance and strengthen their quality management systems and overall level of audit quality. The programme will also provide smaller firms with the opportunity to feed into a dialogue with the regulator around the appropriate level of regulatory scrutiny for less complex PIEs with a view to opening up new opportunities in this space for both providers and clients.   

FRC issues additional guidance for FRS 102 preparers 

The regulator has expanded its offering of factsheets aimed at entities reporting under FRS 102. Factsheet 12 ‘presentation of the financial statements’ provides a clear summary of the options available to preparers in the format of the financial statements. Factsheet 13 ‘the going concern basis of accounting for small companies and micro-entities' aims to help management at small and micro entities perform and document a robust going concern assessment. The updated guidance can be found on the FRC’s website.  

FRC launches Innovation and Improvement Hub 

The newly launched Hub aims to bring together different strands of existing programmes, and provide a ‘one stop shop’ for accessing FRC resources. Currently the Hub has three main focuses; the impact of AI on the future of audit; working to reduce the length of annual reports and accounts; and working to ensure there is a joined up regulatory approach across the audit ecosystem. However, over the medium and longer term, the Hub will look to be a catalyst for increasing dialogue and advancing mutual interests across the market. The Hub can be accessed here.   

AUDIT & ACCOUNTANCY: CHARITIES 

International reporting standard for non-profit organisations set to launch 

On 21 October, in Geneva, Switzerland, the International Non-Profit Accounting Standard (INPAS), the first internationally recognised standard for the sector, will be launched. Whilst no plans have been announced to adopt the standard in the UK, it will increase the level of standardisation and simplify financial reporting across the sector on the international stage, assisting auditors, funding organisations and donors and other stakeholders looking to place reliance on published financial information in the non-profit sector. Further information can be accessed here.   

TAXATION