FRC - Small and medium-sized enterprises market study

Michael Lavender explores the FRC's market study in the challenges faced by small, medium and enterprises (SMEs).

On 3 February 2025, the FRC announced a market study into SMEs which aimed to examine the challenges faced by SMEs in relation to audit and reporting, where practitioners have difficulties in auditing SMEs, and understanding the decision-making process for SMEs who procure audit services when otherwise exempt. 

The initial consultation process comprised a number of roundtable sessions with Auditors, SMEs, advisers and capital providers. Roundtables took place during March and early-April, including a session facilitated by ICAS and  involving representatives some of our audit registered firms.

The FRC followed up on the round tables with a webinar on 15 April 2025 where Kate O'Neill, Director of Stakeholder Engagement and Corporate Affairs, Mark Babington, Executive Director of Regulatory Standards, and Dhruve Shah, Deputy Director of Professional Body Supervision discussed the feedback they’d gathered so far. While the invitation to comment closed on the 25 April 2025,the webinar clarifies that the market study is just one part a broader campaign which include the FRC developing materials and guidance designed to support firms to conduct high quality audits that are proportionate to the size and complexity of their SME clients (the proportionality and scalability of the ISAs being a subject covered by Kate and Mark in a previous webinar on Understanding Audit Standards, commented on below, and is a clear thread in recent communications).

ICAS responded to the market study in April, read our full response here.