FRC consults on proposed revisions to ISAs (UK) 700, 701 and 720

The Financial Reporting Council (FRC) is consulting on proposed revisions to three auditor reporting standards:

• Forming an Opinion and Reporting on Financial Statements – ISA (UK) 700;
• Communicating Key Audit Matters in the Independent Auditor’s Report – ISA (UK) 701; and
• The Auditor's Responsibilities Relating to Other Information – ISA (UK) 720.

According to the FRC, the changes are designed to simplify and declutter the auditor’s report and encourage the inclusion of more relevant information to support investor decision-making.

Three significant changes proposed by the FRC include:

• requiring auditors to make key observations on all Key Audit Matters, where feasible;
• introducing a new obligation for auditors of companies that apply the UK Corporate Governance Code to describe in the auditor’s report how the entity’s controls influenced the audit approach;
• additionally, auditors must consider the need to communicate any significant deficiencies in internal controls identified during the audit.

Pending final approval next year following the consultation, the requirement for auditors to detail the extent to which the audit was capable of detecting irregularities, including fraud, will apply solely to public interest entities (PIEs) and listed entities. Furthermore, there will be a return to genuine reporting by exception regarding Companies Act requirements and UK Listing Rules. Auditors will no longer need to outline their responsibilities or provide conclusions on these matters within the audit report, when there is nothing to report.

The FRC proposes that the amended standards apply for audits of financial statements for periods beginning on or after 15 December 2026.

The FRC is also consulting on proposed revisions to strengthen UK auditing standards on fraud and going concern: ISA (UK) 240 and ISA (UK) 570.

The consultations run until 16 January 2026.

ICAEW is keen to hear your views. Please send comments to emma.cross@icaew.com before 16 January 2026.

Reinforce audit quality with FRC insights

A report published by the FRC in October 2025 highlights key findings and good practice that may help firms to reinforce audit quality in 13 thematic areas, including quality management, revenue recognition and journal testing.

The report is based on recent findings by the FRC’s Audit Quality Review (AQR) team during inspections at 12 of the largest UK firms, so the findings will not be relevant for all audit firms or in every circumstance.

Nonetheless, it may help to mitigate the risk of similar issues arising and enable the adoption of good practices that could enhance the effectiveness and quality of the overall audit approach in firms of many shapes and sizes.

In addition to the overview of key findings and good practice provided for each thematic area, the accompanying appendix offers more anonymised detail.

Another recent output from the FRC includes a new initiative to build capability and support growth by small UK audit firms that want to establish a greater presence in the UK PIE audit market.

Appoint an alternate if you are a sole practice auditor

Sole practice auditors have until 1 December 2025 to appoint an alternate, if one is not already in place. This is required following a change to UK Audit Regulations on 1 June 2025 (see regulation 2.02A).

Learn more about why, what is required and complete the necessary forms.

Enhance your SoQM and its annual evaluation

Since the first annual System of Quality Management (SoQM) appraisal deadline on 15 December 2023, firms have worked hard to continuously enhance their SoQM and its annual evaluation. There is always room for improvement – and plenty of ICAEW resources to assist with this.

Examples include:

• a webinar sharing audit monitoring insights from the Quality Assurance Department on ISQM 1 implementation;
• Audit & Beyond articles offering 10 top tips on enhancing your SoQM and its annual evaluation and good practices and pitfalls in annual SoQM evaluations and documentation; and
• guidance from ICAEW’s Technical Advisory Service in its ISQM (UK) 1 Annual evaluation helpsheet.

Technical updates

Visit our Technical news in brief for more from regulators and standard setters on developments in auditing and assurance, financial reporting, ethics and sustainability.