Newswire August 2025

AUDIT & ACCOUNTING

FRC publishes latest enforcement review

The Financial Reporting Council (FRC) has published its latest Annual Enforcement Review for the 2024/25 period, examining the key issues underlining the most notable cases the regulator has investigated during that time.

A total of 12 cases were resolved through Constructive Engagement; two were closed with no further action; and nine were resolved through settlements, with financial sanctions of £14.5m in total levied. The numbers of cases were broadly comparable with the prior period.

The regulator noted a number of recurring themes in the concluded investigations, including a lack of scepticism; failure to comply with the Ethical Standard; failure to adequately understand the business and related laws and regulations, presentation and disclosure, work on going concern and a lack of appropriate audit evidence.

For assistance and resources on any of the issues identified, please visit our Audit Quality hub. Mercia’s File Review and Technical Query teams are also a useful resource for auditors looking for comfort that their work meets regulatory requirements.

FRC launches next phase of Future Audit Supervision Strategy (FASS)

Following the feedback received during the first phase of the FASS, the FRC has now outlined, and is seeking comment on, a series of proposals including:

• Adapting the future supervisory approach to take account of the effectiveness of the Systems of Quality Management of audit firms
• Developing the approach to graded file inspections and its impact to reflect a firm’s audit portfolio and role in the market
• Introducing a transition period during which the FRC will reduce the inspection work that it performs on the International Standard of Quality Management (UK) 1 for the 12 largest Public Interest Entity audit firms
• Removing the current tiering structure to avoid labels for groups of firms in the FRC’s reporting
• Proportionately applying the supervisory approach across the whole market by both the FRC and the Recognised Supervisory Bodies
• Developing the reporting model for the audit market to ensure reporting continues to provide value for investors, users of financial statements (such as pensioners, employees and creditors), businesses and the public.

The regulator is inviting feedback before a 30 September deadline. A series of roundtable discussions will also be held.

BSI publishes new AI assurance standard

As the market for AI assurance continues to grow (with the Big Four audit firms now looking to launch AI audit programmes), the British Standards Institution (BSI) has produced the world’s first international standard, aimed at bodies which independently audit AI management systems.

Unlike previous AI related standards, which focused on the tools themselves, the BSI’s new standard focuses on AI system certification, with a particular focus on governance issues. It is hoped that this will encourage responsible adoption, with AI assurance at the heart of the roll out and development of these tools.

FRC revises Provision 29 of the UK Corporate Governance Code

Provision 29 has been a longstanding, key element of the Code, requiring companies to describe how the board has monitored and reviewed the effectiveness of the internal control framework. From 2026 financial years onwards, the provision will require a declaration by the board of the effectiveness of material controls as at the balance sheet date and a description by the board of any material controls that have not operated effectively, as well as details of action taken or proposed to address the issue (in addition to a summary of follow up on previously proposed actions from prior financial reporting periods).

Whilst the change is unlikely to require specific updates to the auditing standards, ISA (UK) 720 already makes reference to the provisions of the Code as part of Other Information and, as such, auditors will need to be aware of the changes and ensure that their programme of work includes work to understand the commentary and its consistency with the rest of the financial statements and their understanding of the entity.

UKEB releases fourth research paper on Statement of Cash Flows

In response to a call for comment from the IASB, the UK Endorsement Board (UKEB) has published a fourth research paper, summarising users’ views on possible ways forward for a prospective revision of related standards. highlights users’ key priorities in relation to the cash flow statement, including issues surrounding the reconciliation of net debt, the need for a ‘cohesiveness principle’ requiring sufficiently granular data to be disclosed to enable users to reconcile the cash flow statement to the other core financial statements and a general need for higher quality, more transparent disclosures, amongst others.

Upcoming anti-money laundering reforms will affect accountants

The UK government has unveiled significant reforms to its Money Laundering Regulations (MLRs) aimed at enhancing anti-money laundering (AML) controls. These changes, part of the Economic Crime Plan 2023-2026, will increase the focus on risk management, transparency and enforcement for accountants, company service providers and AML supervisors. The reforms emphasise a robust, risk-based approach to compliance, particularly concerning customer due diligence and the registration of trusts, which will now include more entities holding UK property.

Key changes include the clarification of enhanced due diligence requirements; mandatory checks for high-risk jurisdictions; and new obligations for non-UK trusts. Accountants will need to adapt their practices to meet these requirements, especially in tax planning and client services. Additionally, the government plans to tighten regulations around company formation, particularly for off-the-shelf companies, to improve transparency and prevent misuse of corporate structures. As these reforms take shape, professionals will need to stay informed and ready to implement new compliance measures effectively.

Government releases 2025 national risk assessment of money laundering and terrorism financing

The first update since 2020, the government’s 2025 release is its fourth comprehensive review of the risk level within the country relating to money laundering and terrorism financing. The review aims to assist professionals, law enforcement and other stakeholders to combat the extant risks by presenting a clear and comprehensive picture of the current environment, including evolving threats and challenges.

CRYPTOCURRENCY

US Enacts Landmark Cryptocurrency Legislation, Setting Stage for Stablecoin Regulation

The US has made a significant leap forward in cryptocurrency regulation with the passage of its first major national legislation, known as the Genius Act. This bill establishes a regulatory framework specifically for stablecoins - cryptocurrencies backed by reliable assets like the US dollar - marking a crucial step toward mainstream acceptance of digital currencies. Following approval from both the House and Senate, President Trump is expected to sign the bill into law, a shift from his earlier scepticism toward cryptocurrencies, reflecting increased support from the industry.

While supporters view this legislation as a necessary move to provide clarity and foster growth within the crypto market, critics warn of potential risks it may introduce to the financial system. Concerns centre around the lack of robust consumer protections and the possibility of tech firms engaging in banking-like activities without adequate oversight. Despite these reservations, the bill garnered bipartisan support, with many lawmakers believing that establishing clear rules is preferable to the current regulatory uncertainty. Looking ahead, two additional pieces of legislation related to cryptocurrency are on the agenda, though analysts suggest that significant regulatory advancements may be on hold for now.

TAXATION