Improving transparency: FRC proposals to revise auditor reporting standards ISA (UK) 700, 701 and 720

Published: 12 November 2025

5 minute read

On 11 November, the FRC hosted a webinar where Kate O’Neill, Director of Stakeholder Engagement and Corporate Affairs, James Ferris, Director of Audit Policy, and Project Directors - Audit & Assurance, Kate Dalby and Peter Kitson, unpacked the key changes on proposed revisions to ISA (UK) 700, 701 and 720 and their implications.

If you missed the webinar, you can watch the recording below.

Questions and answers

1. Re 720: Will the proposed changes really not lead to regulatory scope creep in terms of what the FRC expects auditors to do test/ in respect of the 'front-end' disclosures?

We do not believe our proposals on ISA (UK) 720 should lead to ‘regulatory scope creep’ based on the detailed requirements. Additional application material has been added explaining that the auditor uses professional judgment to determine the nature and extent of procedures to address the requirements.

We work closely with colleagues in AQR when we issue new or revised standards to ensure that the FRC has a single understanding and approach to requirements. This will be the case for the proposed enhancements to auditor reporting standards.

2. Will the FRC update the bulletin on the illustrative auditor's reports for the proposed changes? If so, what is the timescale for publishing that updated bulletin once the revised standards are issued?

We will consider next steps on additional materials to support auditors to apply the new standards following the conclusion of the consultation and the issuance of the revised standards. We would anticipate that such materials would be issued in a timely manner to support auditors before the proposed adoption date of the newly revised standards, which is 15 December 2026.

3. Could you explain the aim of the additional requirements for UK auditors?

We are not including any new or additional requirements. We are trying to simplify the description of ‘other information’ and clarify the auditor’s responsibilities. The requirement to understand legal and regulatory requirements already exists and we would still expect auditors to have that understanding in order to determine whether other information is materially misstated in the context of consistency with the financial statements and evidence obtained in the course of the statutory audit. This requirement was originally introduced in 2016 to reflect the fact that many auditors have a legal responsibility under the Companies Act 2006 to report on whether the directors report, strategic report and corporate governance statement has been prepared in accordance with the applicable legal requirements. ISA (UK) 720 helps auditors to respond to this legal requirement.

4. The proposed requirements in this area are not phrased as being based on the work performed/ information received in the course of the financial statements audit (a difference to the current phrasing for the SoI). Is this an expected difference compared to current requirements and other responsibilities relating to the other information in this respect?

We are not proposing any changes to the scope in this regard. The requirements of ISA (UK) 720 apply within the context of an audit of financial statements. As such, the auditor’s responsibilities under this standard are inherently linked to the audit procedures performed in accordance with other ISAs (UK). Therefore, specifying that the auditor’s work effort is undertaken “in the course of the audit” is – in our view – redundant. The scope and nature of the auditor’s consideration of other information are already defined by the standard’s integration into the audit framework, and do not imply any separate or additional engagement beyond the audit itself.

5. In respect of the new paragraph added to the irregularities, including fraud (ISA (UK) 701 - A59-6, if there are no matters that are specific to the entity, and the only respond is the generic procedures that the auditor is expected to perform - would you expect no disclosure at all regarding procedures in the irregularities, including fraud section?

The auditor is still expected to provide a description of the extent to which the audit is designed to detect irregularities, including fraud. In the example set out above, we would anticipate that the description would be high level and comparatively brief.

6. Given DBT's proposal to remove Directors' Report and Strategic Reports from small and medium companies, this is likely to remove the Directors' Responsibilities Statement. Given that the Audit Reports Bulletin includes "As explained more fully in the directors' responsibilities statement set out on page ...." - do you anticipate this section will be enhanced to more fully describe the directors' responsibilities as part of the audit report?

ISA (UK) 700 already sets out expectations of what should be included in the auditor’s description of management’s responsibilities for the financial statements. As noted in response to Question 2, we will consider next steps on materials to support auditors in applying the new requirements following the conclusion of the consultation process. Clearly, any new guidance would consider the changing regulatory landscape, including any changes in law and regulation which impact the content of the auditor’s report.

7. I understand the rationale for removing detail e.g. re reporting by exception, from the audit report so that users focus on the specific detail. However, to what extent do you think there could be a risk that this may reduce users' understanding of auditors' responsibilities generally? For example, is there evidence that users do actually make use of the current FRC linkage?

We do not consider that removing specific details on reporting by exception or the description of the extent to which the audit was considered capable of identifying irregularities including fraud will result in a diminution of users’ understanding of auditor’s responsibilities. All auditor’s reports are required to include a statement of the auditor’s responsibilities; our proposals remove material which very rarely communicates useful information to users and is focussed on specific legal duties rather than the overarching responsibilities of an auditor.

We do not have direct evidence on the extent to which users utilise the statement of auditor’s responsibilities hosted online on the FRC website. However, it is our understanding that many firms link through to the statement in their auditor’s reports.

8. If there was a significant deficiency in internal control that the auditor judged worthy of reporting on, wouldn't this already be covered under the auditor's responsibilities re Key Audit Matters?

The definition of a Key Audit Matter in ISA (UK) 701 focusses on issues that were of most significance in the audit of financial statements of the current period. A significant deficiency in internal control does not necessarily match this definition. Moreover, our research into Key Audit Matters, published as part of a series of snapshots, indicated that matters relating to internal controls were rarely communicated as Key Audit Matters.

Our proposals allow for auditors to report significant deficiencies as a standalone Key Audit Matter if the auditor determines that the significant deficiency merits communication as such.

9. Particularly helpful that clutter is being cut and important to note that some clutter was FRC imposed and the change of approach will be appreciated. However, the assertion that in relation to the new requirements are not new and that auditors are not doing anything new stretches credibility.

The additional required disclosures in the auditor’s report (for some entities) are built on current requirements and are designed to enhance them. These disclosures in and of themselves ought not to drive significant additional work-effort during the audit, because they require the auditor to set out what they have done in the course of the audit. Reporting on control deficiencies, for example, is based on the communications to Those Charged With Governance already required by ISA (UK) 265.

10. In terms of reporting on other information, the revised ISA (UK) 720 requirements omit the phrase 'during the course of the audit'. Without this wording, could there potentially be a substantial increase in scope of work for auditors?

As set out in the response to Question 4, we did not intend to imply that there is a change in scope as a result of these revisions.

11. Can we get a more detailed bulletin of illustrative auditor's reports?

As set out in the response to Question 2, we will consider next steps on materials to support auditors in applying the revised standards following the conclusion of the consultation process. As part of that process, we will consider the appropriate extent of detail to be included in these materials.