by John McCarthy Consulting Ltd. | Jun 25, 2025 | Blog, News
In recent weeks we have published a series of blogs about guidance published by the UK Financial Reporting Council to assist auditors with the audit process and help explain the purpose of audit to the public.
This is about as exciting as auditing gets, but the profession is waiting with bated breath (at least I am anyway) for the FRC’s next publication to assist SME auditors, in particular.
The FRC is expected to publish for consultation a new Practice Note (PN) to support auditors of SMEs. Many auditors will remember the (now withdrawn) Practice Note 26 ‘Guidance on Smaller Entity Documentation’, which was withdrawn seven years ago this month, as it had fallen out of date. Hopefully the new PN will become as well liked and used as PN 26 once was.
PNs are intended to assist auditors in applying auditing standards of general application to particular circumstances and industries and are regarded as persuasive rather than prescriptive. Practice Notes are designed to assist auditors in applying auditing standards of general application to particular circumstances and industries.
Even though they may be developed without the full process of consultation and exposure used for standards, PNs are well regarded among the audit profession as indicative of best practice.
The draft PN is expected to be available for consultation over the summer, and the final version should be published by Q4 of 2025.
The purpose of the PN will be to help auditors scale the International Standards on Audit (ISAs) to suit smaller and less complex entities. The ISAs are a framework of standards which ensure that financial statements are audited consistently and transparently.
The ISAs are designed to be scalable so that they can be applied proportionately to the size of the company audited but these scalability provisions aren’t consistently applied and aren’t always used properly.
Hopefully the new PN will assist with both objectives to achieve consistent and accurate application of the ISAs.
For audit cold file reviews and tailored training sessions explaining more about various topics like AML, Audit, FRS 102, please send a mail to john@jmcc.ie.
For more on engagement and representation letter templates and a variety of CPD webinars on money laundering and other accounting/audit related topics, please go to our website for:
ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard. We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. Please contact John McCarthy FCA by email at john@jmcc.ie.
by John McCarthy Consulting Ltd. | Jun 23, 2025 | Blog, News
The UK Financial Reporting Council published, in May 2025, some brief guidance, as part of a campaign to support SME Auditors which explains What is an Audit?
The main topics dealt with in the guide include:
- What is an audit?
- What do we mean by ‘materiality’?
- What is the purpose of an audit?
- What value does an audit bring to the audited entity?
- What are the principles common to all audits?
This week we will look at the topic that explains the ‘Principles Common to all Audits’
The guide points out that each audit is different, but there are some principles that are foundational to all audits. The three main ones are:
| Independent |
Professional scepticism |
Risk Based |
| To fulfil its primary purpose of enhancing confidence in the financial statements, the auditor must be and be perceived to be independent. This gives the intended users confidence that the auditor will have the willingness to challenge management where appropriate, and conduct a robust audit |
Professional scepticism is a core part of an auditor’s mindset. It is characterised by a willingness to challenge and inquire, to look for contradictory as well as corroborative evidence to critically assess information. |
Audits are fundamentally risk based. This means that the auditor will allocate more time and resources to transactions, balances and disclosures that have a higher risk of material misstatement. This principle is the source of most of the proportionality that is inherent in an audit |
This guide is well worth reading and passing on to your clients to help better explain the valuable service that auditors provide. See What is an Audit? for more detail
For audit cold file reviews and tailored training sessions explaining more about various topics like AML, Audit, FRS 102, please send a mail to john@jmcc.ie.
For more on engagement and representation letter templates and a variety of CPD webinars on money laundering and other accounting/audit related topics, please go to our website for:
ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard. We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. Please contact John McCarthy FCA by email at john@jmcc.ie.
by John McCarthy Consulting Ltd. | Jun 3, 2025 | Blog, News
As we said last week, the UK Financial Reporting Council published, in May 2025, some brief guidance, as part of a campaign to support SME Auditors which explains What is an Audit?
The main topics dealt with in the guide include:
- What is an audit?
- What do we mean by ‘materiality’?
- What is the purpose of an audit?
- What value does an audit bring to the audited entity?
- What are the principles common to all audits?
This week we will look at the topic ‘What value does an audit bring to the audited entity?’
It explains that the primary benefits of an audit, from the audited entity’s perspective, stem from the enhanced trust and confidence that can be provided to users of the financial statements.
Many
- Banks
- Lenders and
- Investors
find audited financial statements will signify that the robust business practices operated by businesses that are subject to audit help give such stakeholders as these, additional confidence and may help inform their decisions to allocate capital.
An audit may also result in
- lower risk premiums on investments;
- be a precondition as part of a loan agreement; or
- be a requirement as part of a contractual arrangement.
In each of these cases, the audit provides accountability and transparency for the users of financial statements. In addition, an auditor can provide an informed perspective on the controls and processes, which can in turn support management in enhancing them.
The guide emphasises that the auditor must abide by ethical and independence standards. While the auditor may provide an opinion and feedback on judgements made by management, it is not their role to play a part in management decision taking.
This guide is well worth reading and passing on to your clients to help better explain the valuable service that auditors provide. See What is an Audit? for more details.
For audit cold file reviews and tailored training sessions explaining more about various topics like AML, Audit, FRS 102, please send a mail to john@jmcc.ie.
For more on engagement and representation letter templates and a variety of CPD webinars on money laundering and other accounting/audit related topics, please go to our website for:
ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard. We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. Please contact John McCarthy FCA by email at john@jmcc.ie.
