Newswire June 2025

AUDIT & ACCOUNTING

FRC concludes annual review of FRS 101

The FRC has completed its annual review of the FRS 101 Reduced Disclosure Framework and issued its 2024/25 cycle Amendments. The release follows feedback on the FRC’s FRED 86, issued in December 2024, which sought feedback on proposals to amend FRS 101 to reflect the impact of new standards and amendments to IFRS issued by the IASB in the period to 31 August 2024.

The review and feedback have resulted in amendments, including:

• exemptions available to entities applying FRS 101 under IAS 1 will be transferred to the new IFRS 18 and other standards as relevant;
• exemptions for qualifying entities in relation to disclosures around Management-defined Performance Measures (MPMs);
• exemptions for qualifying entities in relation to the analysis of expenses classified by function in the profit and loss statement; and
• the prevention of the application of IFRS 19 by entities applying FRS 101.

Further information can be found on the FRC’s website.

FRC publishes additional audit guidance for SMEs

As part of its ongoing campaign to improve access to audit services by small and medium enterprises (SMEs), the regulator has produced further supporting materials to help SMEs navigate and engage with the annual audit process with confidence. These include:

• a summary document detailing the key benefits audit provides, not only to shareholders, owners and potential investors but to other stakeholders and the wider public, as well as outlining the key principles that lead to a successful audit; and
• a podcast where senior FRC staff discuss the crucial role audit plays in supporting confidence and transparency in financial statements and capital markets at large.

The materials can be accessed via the FRC's website.

FRC issues updated UK Stewardship Code 2026

The Code, which operates alongside other regulatory pronouncements from bodies such as the FCA and TPR and aims to provide a framework for transparency in financial reporting by asset owners and managers, has been reviewed and updated for 2026, with a focus on reducing the reporting burden for signatories without losing sight of longer term value creation for stakeholders. For further information, the full report can be found here.

ICAEW

ICAEW releases 2025 Audit Monitoring Report

The report provides an overview of the outcome of the 401 reviews (covering 790 audit files in total) conducted by the regulator in 2024 as part of its ongoing quality assurance programme, including a number of useful insights for UK audit practices. Overall, 67% of audits reviewed were found to be good or generally acceptable, marginally down from 2023, whilst 10% required significant improvement.

Common weaknesses identified include challenges with documenting the risk assessment under the revised ISA 315, failure to appropriately tailor data analytic parameters when applying technology to addressing the risk of management override of controls, lack of depth in work on estimates and judgements and weaknesses in understanding the relationship between experts and service organisations and the audited entity, amongst others. The report also provides further root cause analysis and links to suggested ICAEW resources to help with the issues identified.

For further guidance and insight, please visit our Audit Quality hub.

2025 ICAEW Audit Regulations are now in effect

The revised 2025 Audit Regulations are now in effect as of 1 June and include a requirement for all ICAEW registered auditors to notify the regulator when appointed as auditor on certain complex or high risk engagements. The changes also impact sole practice auditors, who will now be required to appoint an alternate , though a six month transition period applies. Further information can be found here.

ICAEW issues guidance on 2025 Code of Ethics and auditor independence

The ICAEW’s updated Code of Ethics comes into effect from 1 July. The amendments have been made with a view to aligning the ICAEW Code with IESBA’s Code of Ethics. Revisions relate to:

• the objectivity of an engagement quality reviewer (EQR);
• the definition of engagement team and group audits;
• the provision of non-assurance services to an audit client;
• fees charged to audit clients; and
• the definition of public interest entity (PIE) and listed entities.

In anticipation of the introduction of the new code, the ICAEW has also released detailed guidance, with a view to helping accountants understand and prepare for their responsibilities under the updated Code. For further guidance on ethics for accountants and auditors, Mercia subscribers can access our course Navigating Ethical Requirements in 2025.  

SUSTAINABILITY

FRC launches consultation on UK version of International Standard on Sustainability Assurance (ISSA) 5000

he FRC proposes adoption of the standard on a voluntary basis by assurance providers. The proposed UK standard is designed to align with the international standard and is intended to be profession agnostic, meaning minimal administration burden for entities carrying out engagements across jurisdictions and enabling a wider pool of potential providers, provided quality management and ethical standards are met. Prospective users have until 31 July to respond to the consultation.

IAASB and IESBA Staff Provide FAQs on Implementing ISSA 5000 and IESSA

Staff from the International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA) have released two new publications to support implementation of the IAASB’s and IESBA’s global sustainability-related standards: the International Standard on Sustainability Assurance (ISSA) 5000 and the International Ethics Standards for Sustainability Assurance (IESSA).

Developed in close coordination and launched in January 2025, ISSA 5000 and IESSA provide a coordinated global assurance and ethics framework for sustainability assurance engagements. The new publications aim to highlight the interoperability of the two Boards’ standards and assist practitioners in consistently applying them.

TAXATION