[Global Financial Insights] FRC | IAASB | IESBA Drive Audit Reforms

Editorial Team – [2025] 176 taxmann.com 781 (Article)

Global Financial Insights is a weekly feature for the Accounts and Audit Module subscribers of Taxmann.com. It provides you with the latest updates on financial reporting and auditing practices from across the globe. Here is this week’s financial update:

1. FRC launches measures to strengthen SME audit market

The Financial Reporting Council (FRC) has published emerging findings from its year-long market study aimed at assessing the effectiveness of the UK audit market for small and medium-sized enterprises (SMEs). Alongside this, it has launched a consultation on a new draft Practice Note designed to promote more proportionate, effective, and scalable audits tailored to the needs of SMEs. Drawing on input from over 500 stakeholders, the study identified several key challenges, including the inflexibility of current audit standards, pressures leading to over-auditing, inadequate access to appropriate technology, inefficient regulatory requirements, and a lack of capacity or specialist knowledge in smaller firms.

To address these concerns, the FRC has proposed practical guidance that allows auditors to exercise professional judgment more effectively when auditing SMEs. It also plans to work with supervisory bodies to align regulatory expectations and engage with technology providers to develop tools better suited to SME audit environments. With approximately 2,000 audit firms performing over 70,000 SME audits each year, the initiative is seen as a timely intervention to ensure that the audit market remains efficient, accessible, and fit for purpose. Stakeholders have broadly welcomed the proposals, noting their potential to reduce compliance burdens and improve audit quality without compromising rigour. The FRC is inviting feedback on the draft Practice Note and will host a webinar on 30 July to discuss its proposals in further detail.

Source – Financial Reporting Council

2. FRC releases revised technical actuarial standard for pensions (TAS 300 v2.1)

The Financial Reporting Council (FRC) has issued an updated version of Technical Actuarial Standard 300 (TAS 300), which applies to pensions-related actuarial work. The revised standard, version 2.1, will take effect from 1 November 2025 and is intended to reflect recent developments in the defined benefit pension funding framework and increased attention to the management of pension scheme surpluses. The amendments aim to provide greater clarity, remove outdated requirements, and ensure that actuarial work continues to support effective decision-making around funding strategies and surplus utilisation. This update is part of broader efforts to align actuarial standards with evolving regulatory and policy landscapes in the pensions sector. While version 2.1 will be mandatory for work conducted on or after the effective date, actuaries may continue using version 2.0 for certain funding valuations dated before 22 September 2024.

Source – Financial Reporting Council

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