ICAEW endorses FRC call to reform UK SME audit practices

The Institute of Chartered Accountants in England and Wales (ICAEW) has endorsed the Financial Reporting Council’s (FRC) decision to enhance the audit practices for small and medium-sized enterprises (SMEs) in the UK.
Findings from an FRC study into the SME audit market have revealed widespread stakeholder concerns regarding the current auditing standards, which perceived as lacking the “scalability and proportionality” to serve SMEs.
The ICAEW has highlighted that the decline in the SME audit market has coincided with a decrease in the number of registered auditors since the introduction of audit regulation in the early 1990s.
While some of this decline is attributed to raised audit exemption limits, the ICAEW suggests that the situation has been compounded by the “disproportionate regulatory burdens” placed on auditors.
FRC proposed a consultation on a Practice Note that provides guidance for auditors to enhance the delivery of audits and partnering with Recognised Supervisory Bodies (RSBs) to promote a for a regulatory approach.
Despite welcoming the proposed measures, the body said it is “disappointing” with the FRC’s approach to public engagement on the issue, calling for a public debate on the applicability of the International Standard on Auditing for Less Complex Entities (ISA for LCE) within the UK.

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By GlobalDataICAEW chief policy and communications officer Iain Wright said: “SMEs are crucial to the UK economy and local communities, and can be at the vanguard of addressing and solving the UK’s productivity and growth challenges.
“We strongly support FRC’s initiative to help SMEs access audit services and, in turn, help them secure the capital they need to innovate, scale and grow.”
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