On 3 February 2025, the FRC launched a market study examining how effectively the audit market serves small and medium-sized enterprises (SMEs) and considering options for reducing their reporting burden (Market Study: SMEs). This study constitutes the first phase of a wider FRC campaign to support UK SMEs in accessing audit services and securing the capital they need for growth (FRC Press Release).
In-scope companies for the market study are corporate entities that qualify as small or medium under the Companies Act 2006 definition as of 6 April 2025 (see Accounts and reports, Q&A here and here), and that have not elected to apply any legislative exemptions from audit (see Audit and auditors, Q&A here). Consequently, the audit firms that are relevant for the study are those that conduct audits for entities that fall within either definition.
Key areas that the market study will explore include:
- the functioning of the audit market for SMEs, including any burdens arising from reporting and audit requirements;
- the market forces that are driving the consumption of audit services by SMEs;
- challenges that auditors face when auditing SMEs; and
- regulatory developments that should be considered as part of the study, such as the change in company size thresholds from 6 April 2025 (see FC Feature 10 December 2024) and the expected consultation in 2025 on changes to reporting and audit requirements, following the outcome of the non-financial reporting review (see FC Feature 14 October 2024).
The FRC is inviting stakeholders to submit comments and evidence on the SME market study by 25 April 2025. In addition to written responses, the FRC intends to gather views, information and data by way of meetings, roundtables and additional external research or outreach. The study is expected to conclude before the end of the year.
Further information about the market study is provided in FRC Podcast: Supporting UK SMEs to grow and scale.
First published on the Corporate News Service on 03 February 2025.
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