As part of the Financial Reporting Council’s (the “FRC's”) campaign to support U.K. small and medium-sized enterprises (“SMEs”) in accessing audit services and securing the capital they need for growth, on 3 February 2025 it announced the launch of a study into how effectively SMEs are serviced by the audit market.

The FRC acknowledges the important role that audited accounts play in helping SMEs to secure the capital needed to scale but is aware of the difficulties around the cost and availability of audit services. The FRC are looking to explore this balance and examine how standards are interpreted and applied by SMEs and where the difficulties lie in audit and reporting.

Whilst the FRC would welcome all responses (with supporting data and evidence where available), they have identified six key questions for respondents.

1. How well is the UK audit market currently functioning for SMEs?
2. What are the reasons for SMEs obtaining financial audits? What are the primary drivers in instances where an audit may not be mandatory to an SME?
3. What, if any, challenges do SMEs experience in relation to audits (e.g. in finding an auditor, engaging with the audit process)?
4. What, if any, challenges do audit firms experience in relation to audits for SMEs?
5. What, if anything, would you like to see change in relation to SME audits? (For example, any regulatory /policy changes and/or any specific actions taken by the FRC, Government, firms, companies or others).
6. What, if any, forthcoming developments might the FRC want to consider as part of this market study?

The FRC has requested comments and evidence to be e-mailed to compeition@frc.org.uk by 25 April 2025.