2026 could be a transformative year for audit and assurance, thanks to much-anticipated reform and incoming legislation, but a lot depends on the political appetite to push measures through.

Audit reform remains in limbo

The delayed Audit Reform and Corporate Governance Bill remains at the pre-legislative stage for example, with progress dependent on expected consultations on, among other things, the definition of a public interest entity (PIE).

But once implemented, the legislation could replace the Financial Reporting Council (FRC) with the Corporate Reporting Authority (CRA) – a new regulator with stronger powers to improve trust, quality and transparency within the profession. There have been countless calls by professional bodies including ICAEW to bring the measures forward but progress seems to have stalled.

The proposals include holding company directors to account for existing corporate reporting responsibilities, as well expanding on the PIE definition, to include organisations with an annual turnover of more than £1bn and over 1,000 employees.

According to Alex Russell, Head of Audit and Assurance Strategy at the ICAEW, the progress of the bill during 2026 will depend on ‘political will’. As Russell explains, the UK growth agenda ‘underpins’ much of current government strategy, along with its commitment to reducing administration burden on companies.

Progress will therefore depend very much on the latest government thinking. Otherwise, Russell warns, ICAEW, the firms and others may have to continue to make progress on audit quality themselves.

A big year for sustainability assurance

No matter what happens with Audit and Corporate Governance Reform, we would still hope to see substantial progress in sustainability assurance. Following a 2025 heavy on consultations, the standard, ISSA (UK) 5000 is already out and ready to be used by early adoption, with formal implementation due from December 2026.

After consulting on the UK Sustainability Assurance Regime during mid-2025, we await DBT’s next steps in early 2026, which are expected to include a voluntary sustainability assurance register maintained by the FRC (or the CRA).

The assurance regime will fit as one part of a sustainability jigsaw, with the other pieces being the implementation of the UK Sustainability Reporting Standards and requirements from DESNZ on transition plans.

Misuse of AI could be the next big threat

But it’s not just legislation, or hoped-for legislation that’s likely to dominate 2026. The continued integration of AI within the audit and assurance space will also remain highly relevant, says Russell. AI presents both challenges and opportunities.

“The next big threat to reputation of the profession won’t necessarily come from disorderly corporate failure but from misuse of AI,” he says. “So it’s important that auditors are very transparent about how they use AI and similarly, companies need to be transparent in the way they’re using it.”

AI building on audit quality and efficiency

At the same time, AI could continue to ‘transform’ audit by improving both quality and efficiency while there are enormous opportunities in the profession delivering assurance to ensure models, governance frameworks and systems are fit for purpose.

In Russell’s view, AI will ‘play a bigger role’ in audit in 2026, particularly in terms of emerging technologies that accountants need to ‘get to grips’ with and understanding the governance around AI.

There will be a growing need for auditors to embrace AI and future professionals will need to have the necessary skillsets to work with AI effectively and within certain parameters. “So what skills are we looking for in trainees who can engage with AI and really embrace its power? That’s what we need to consider.”