The Financial Reporting Council (FRC) in the UK has initiated a year-long campaign to facilitate small and medium-sized enterprises (SMEs) in obtaining audit services and lowering reporting burdens.

The move aims to enhance SME’s access to capital and bolster their growth prospects.

SMEs constitute the bedrock of the UK’s economy, accounting for over 99% of all private sector businesses, with a combined turnover of approximately £2.75trn ($3.4trn) and a workforce of around 16.6 million.

Access to audit services is crucial for SMEs to secure the necessary capital for expansion, which in turn generates wealth and employment opportunities.

However, the FRC recognises the hurdles SMEs encounter in procuring audit services at a reasonable cost.

These challenges can impede their growth and raise issues regarding the interpretation and application of auditing standards.

Although the FRC has historically concentrated on larger businesses, it acknowledges the need to extend support to SMEs.

The FRC’s draft three-year strategy, released in December 2024, outlines a focus on SME financial reporting, audit services, and ensuring audit firms apply standards effectively to lower-risk entities.

The campaign will involve comprehensive and transparent engagement with stakeholders, including SMEs, their capital providers, auditors servicing SMEs, and their professional associations.

Reinforcing this commitment, the FRC introduced a consultation last month on proposed changes to the Financial Reporting Standard (FRS) 101.

These amendments aim to facilitate more cost-effective financial reporting for group components that necessitate less disclosure. The consultation period is set to conclude on 7 March 2025.

As a component of this campaign, the FRC has announced three main activities – conducting a market study on SMEs, providing guidance for the proportionate audit of SMEs, and creating support materials for SMEs.

FRC CEO Richard Moriarty said: “SMEs are an important bedrock for the UK economy as drivers of innovation and job creation with their ability to access capital often dependent on having audited accounts.

“I’m keen that the FRC does what it can to support their growth and their ability to scale up.

“This campaign across 2025 is focused on analysing how the audit market is working for SMEs, including the reporting and audit requirements they face, and ensuring they are audited proportionately including considering any steps the FRC can take to support this vital part of the UK economy.”