The Financial Reporting Council (FRC) has launched a market study exploring how the UK audit framework affects small and medium-sized enterprises (SMEs). This initiative is motivated by the significant role SMEs play in the UK economy and the varied experiences they have with audits.
Led by Kate O’Neill, Mark Babington, and Dhruve Shah, the discussion highlights early insights from stakeholder engagement. These include feedback from SMEs, auditors, advisors, and capital providers. A major finding is that while audits are often perceived as costly and burdensome, many SME owners find real value in them—particularly in the early stages—because they help strengthen governance and internal controls, ultimately supporting growth and scaling efforts.
The FRC acknowledges its broader responsibility for regulating the entire audit market—not just large public interest entities (PIEs)—and stresses the importance of proportionate auditing approaches tailored to SMEs’ size and complexity. They emphasise the importance of building guidance and setting best practices that suit the needs of smaller businesses, which are usually overseen by professional bodies like ICAEW, ACCA, and others.
Initial feedback also suggests a demand for simpler, more flexible audit processes that still offer the assurance lenders and investors require. The FRC aims to ensure the audit system works for all tiers of business and welcomes ongoing input as the study continues.
Final findings are expected by the end of 2025, with feedback accepted until April 25, 2025.
Duke Capital Limited (LON:DUKE), formerly Duke Royalty Limited, is a Guernsey-based provider of hybrid capital solutions for small and medium-sized enterprises (SME) business owners in the United Kingdom, Europe and North America, combining the features of both equity and debt.
