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Re-consultation on ISA (UK) 250 and ISA (UK) 270 explainer
The FRC is re-consulting on its proposals to revise two auditing standards to ensure that auditors, when identifying and responding to material Non-Compliance with Laws and Regulations (NOCLAR) and when reporting to regulators, take a proportionate and risk-based approach.
If auditors fail to identify non-compliance with laws and regulations, it can result in poor-quality audits, which introduces the risk of audit failures that harm investors and the public. Certain FRC enforcement cases, along with new compliance obligations and increased risks of penalties for non-compliance from the Economic Crime and Corporate Transparency Act 2023, have made more targeted, risk-based standards a priority.
Key proposed revisions to ISA (UK) 250
New risk-based objective: The standard's objective now focuses on identifying and assessing risks of material misstatement due to NOCLAR.
Removing the direct/indirect distinction: All laws and regulations with which non-compliance could materially impact the financial statements are considered through the same risk-based lens.
Focusing on fundamental laws and regulations: Auditors focus their work on laws and regulations that are fundamental to how a business operates, giving a clear, proportionate basis for judgement.
Clarifying specialist legal skills: Specialist legal expertise will not normally be required - additional application material clarifies the circumstances where it might.
Key proposed revisions to ISA (UK) 270
A more principles-based approach: The standard moves away from prescriptive rules towards principles that support sound professional judgement.
Renaming and renumbering: The standard is renamed and renumbered to make clear it applies across all areas of the audit - not just NOCLAR cases.
Clarification on reporting to appropriate authorities: Reports should go to the authority with the statutory powers to act on the information provided. In some cases, this may mean
Proposed effective date
Audits of financial statements for periods beginning on or after 15 December 2027
How can I respond?
Send to [email protected] for attention of Kate Dalby by Thursday 21 May 2026
How stakeholder feedback has shaped the FRC's re-consultation on ISA (UK) 250 and ISA (UK) 270
The FRC's re-consultation on ISA (UK) 250 and ISA (UK) 270 is the direct result of stakeholder feedback from the initial consultation in 2023/24.
You said: the original objective could require auditors to comprehensively review every law and regulation applicable to an entity, expanding the audit scope.
We've replaced the objective with one focused on risks of material misstatement due to NOCLAR, making clear that the auditor's work should focus on what is needed to express an opinion - nothing more.
You said: removing the direct/indirect distinction, without further guidance, left auditors uncertain about how to focus their work effort.
We've introduced the concept of "fundamental" laws and regulations (those central to how a business operates and continues) to give auditors a clear, proportionate basis for their judgements.
You said: the proposals implied specialist legal expertise – such as lawyers or compliance experts – would be required on every audit, adding significant cost.
We've clarified that specialist legal skills will not normally be required, and added application material to help auditors identify the circumstances where they might.
You said: the proposals placed an unreasonable additional burden on businesses to identify and list the laws and regulations applicable to them.
We've clarified that management retains primary responsibility for understanding the fundamental laws and regulations that apply to their entity, and for having controls in place to address non-compliance.
You said: the proposed public interest reporting requirement in ISA (UK) 270 which would have required auditors to consider reporting even where no legal or ethical obligation existed was disproportionate to the risk it addressed.
We've removed this requirement entirely from the revised standard.
This is a targeted re-consultation focused on the specific changes we have made in response to your feedback. We are asking stakeholders to confirm whether the revised proposals strike the right balance between audit quality and proportionality.
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