Changes to ISA (UK) 700 

The Financial Reporting Council (FRC) has revised ISAs (UK) 700, 701 and 720 to make audit reports shorter, clearer and more useful. The revisions apply to audits of financial statements for periods beginning on or after 15 December 2026.  

Here we focus on the changes to ISA (UK) 700, where two changes will have the biggest effect. Firms will be able to remove:  

• the description of how the audit was “capable of detecting irregularities, including fraud”, as long as the audit is outside the scope of ISA (UK) 701; and 
• matters to be reported by exception (unless there is something to report).   

Audits in scope of ISA (UK) 701 include audits of publicly traded entities and circumstances when the auditor otherwise decides to communicate key audit matters. 

These changes affect only the content of the audit report. They do not change the auditor’s underlying responsibilities or the audit work required. 

ICAEW’s Auditor Reporting Lab explains why this wording appears in current audit reports and provides examples of how it is presented.  

• See Deconstructing the auditor’s report for further information. 

Early adoption 

Early adoption is permitted, and the revised standards do not have to be adopted together. However, for entities within the scope of ISA (UK) 701, adopting revised ISA (UK) 700 without also adopting revised ISA (UK) 701 would remove the requirement to describe the extent to which the audit was “capable of detecting irregularities, including fraud”.  

Where that disclosure is required by law, firms must continue to be aware of the applicable legal requirements, even if the corresponding requirement no longer appears in the version of ISA  (UK) 700 they have adopted. 

Firms do not need to early adopt the standards for all audits. They can choose to adopt them for particular engagements or entities, as long as they comply with all requirements of the revised standard for those engagements. Firms may choose firm-wide adoption for consistency or quality management purposes. 

Remove ‘irregularities’ wording from reports outside ISA (UK) 701 

The requirement to explain the extent to which the audit was “capable of detecting irregularities, including fraud”, has moved from ISA (UK) 700 to revised ISA (UK) 701. It is therefore no longer required in audit reports for entities outside the scope of ISA (UK) 701. 

What can be cut 

• The separate section usually headed ‘Extent to which the audit was considered capable of detecting irregularities, including fraud’.
• Generic lists of laws and regulations, fraud risks and standard audit procedures included only to meet that reporting requirement. 

What must remain 

The description remains required for audits within the scope of revised ISA (UK) 701. For those reports, the wording should focus on risks and procedures specific to the entity, rather than procedures that would be performed in any audit (as per ISA (UK) 701 A59-6). 

Removing this section from the audit report does not change the auditor’s responsibilities in relation to fraud or non-compliance with laws and regulations. It changes only the reporting requirement. 

Remove wording on matters to be reported by exception 

Revised ISA (UK) 700 restores genuine reporting by exception. If there is no matter to report, the auditor’s report no longer needs to describe the auditor’s statutory, or regulatory, reporting responsibility or say there is nothing to report. Reporting by exception is relatively rare in the absence of a qualification. 

Reporting by exception duties vary by entity type. For example, companies incorporated under the Companies Act 2006, charities, housing associations and financial institutions will all be subject to different legislation. 

What can be cut 

• Template paragraphs headed ‘Matters on which we are required to report by exception’ where the auditor has nothing to report (with the exception of the Companies Act, see below).
• Descriptions of the auditor’s reporting-by-exception responsibilities where no reportable matter has arisen.
• For relevant listed entities (those required to make a statement of how they have applied the principles of the UK Corporate Governance Code), wording confirming that the auditor has nothing to report following the review of statements made by those charged with governance under the UK Listing Rules. 

What must remain 

The underlying legal and regulatory duties still apply. If the auditor identifies a matter that must be reported, for example, because the auditor has not obtained all the information and explanations needed for the audit, the matter must still be included in the audit report. This usually accompanies a qualification. 

The same principle applies to the auditor’s review of specified statements under the UK Listing Rules, silence is appropriate only where the required work has been completed and there is no matter to report. 

A note of caution on Companies Act requirements 

Section 496 of the Companies Act 2006 requires the auditor, among other things, to: “… state whether, in the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, he has identified material misstatements in the strategic report (if any) and the directors’ report.” 

In audit reports this has been in practice included within the section on ‘matters to report by exception’, mainly because this is how it currently appears in the FRC Bulletin on Illustrative Audit Reports, which will be updated in due course.  

Firms need to be careful as the Companies Act still requires this statement and it will still need to be included in every company audit report. It can be included as an additional sentence within the section on ‘other matters’ the auditor is required to report on in the Companies Act. See example below for an unquoted company:

Use the FRC’s online description of auditor’s responsibilities 

The revised approach places more of the generic description of the auditor’s responsibilities in the FRC’s online statement. Firms can cross-refer to that statement instead of reproducing the full standard wording.  

The current statement of auditor's responsibilities relates to the auditing standards in force at the time the website is accessed. Firms wishing to early adopt the standards will need to either:

• link to a bespoke version of the statement of auditor’s responsibilities available on the FRC website; or
• include the description:
  • within the body of the auditor’s report; or
  • in an appendix to the auditor’s report, with a reference to it in the main body of the auditor’s report.

Going concern reporting 

Paragraph 13 of the revised ISA (UK) 700 refers to ISA (UK) 570 (Revised March 2026). 

Where revised ISA (UK) 700 is early adopted, firms are permitted to continue to use the extant ISA (UK) 570 (Revised September 2019) for going concern reporting. 

Top tips before changing your templates 

• Confirm that the revised standards apply to the audit period, or that the firm is adopting them early in accordance with the applicable provisions.
• Identify which audits are within the scope of revised ISA (UK) 701 and remove the irregularities section only from reports outside the scope of revised ISA (UK) 701.
• Delete paragraphs on matters to be reported by exception only where no reportable matter has arisen.
• Check cross-references to the FRC’s online statement of auditor responsibilities. 

FRC guidance 

Firms considering early adoption should refer to the FRC’s Staff Guidance Note before updating their audit report templates. This guidance is tailored to circumstances where only ISA (UK) 700 (not ISAs (UK) 701 and 720) is early adopted.  

The FRC is also expected to update its Bulletin on illustrative auditor’s reports in 2027 to reflect the revised standards.