The 2025 Audit Forecast: Impending Reforms, Quality Crisis, And an Opportunity That Waits to Be Seized

The UK audit industry has been under tremendous scrutiny over the past few years. After suffering a series of scandalous failures, the industry was briefly looked upon as a market headed for doom.

Even as we enter the step into the new year, the audit industry faces unprecedented uncertainty. This ambiguity is further catalysed by the ongoing economic impact of the pandemic, changes to audit regulations, growing public scrutiny, and the seemingly never-ending Big Four dominance.

However, with these challenges come significant opportunities for accounting firms to step up and provide high-quality audit services to clients in need. The UK government is continually making efforts to introduce reforms within the industry and bring a strong regulator into action to control audit quality. Thus, the new financial year looks promising for budding auditing firms.

With the FRC introducing the rule of joint audits, it has become mandatory for firms to delegate at least a part of their audit to a smaller firm alongside a Big Four auditor. This has opened a plethora of opportunities for small and medium-sized accountancy firms seeking to set foot in the audit world. With the industry set to undergo a revolution, the demand for audit support and preparation services is also seeing an upward trend.

In this post, we’ll explore the industry’s current state, common audit challenges and solutions, and the key opportunities that lie ahead in the new year.

Current Developments in Auditing

Although several reforms have been introduced to revive the audit industry, the developments remain only partially fulfilled and mostly stagnated. One such development is the transition of authority from the Financial Reporting Council (FRC) to the Audit Regulation and Governance Authority (ARGA). Although the plan for the new regulator was originally proposed in 2019, the actual transition remains pending even in January 2025.

Capitalising on the growing opportunities in the industry, several small and medium-sized accountancy practices are set to enter the audit world. Despite the skills gap and capacity crunch facing firms, the industry is expected to see a boom in 2025 with the support of professional audit support services.

Must Read: What Can You Do Differently for Your Audit Firm in 2025?

The 2025 Audit Forecast: Trends to Look Out For

1. Audit Reforms

Against a volatile economic backdrop, 2025 will be a crucial year for the accounting and auditing landscape. Although the proposed reforms are moving forward at a relaxed pace, the new year may see the FRC introduce new regulations to control the quality of external audits and encourage midsized firms to take part in the accounting audit process.

Another change to look out for will be the FRC’s implementation of its additional supervisory powers through the PIE Auditor Registration regime before the ARGA is brought into force.

2. Increased Competition

The competition in the accounting and auditing sector is rising rapidly despite the multiple controversies and slow pace of reforms. Regardless of the past scandals, the Big Four continue to dominate the audit market – in 2023, they collectively earned 98% of the FTSE 350 audit fees in the UK.

Further, the FRC’s proposition of joint audits positioned a competitive spirit among challenger firms. Small and midsized practices stepping into the industry now face competition not only from the Big Four companies but from other market players. The competition was a deliberate push by the FRC to drive higher-quality audits in the country.

Thus, quality and effectiveness will be key for audit companies to sustain competition in the new financial year. This is one of the reasons professional accounting audit support is actively sought within the industry.

3. ESG Reporting

Building on its work over the years, the FRC’s focus on Environmental, Social, and Governance (ESG) reporting will continue in the new year. Climate change, environmental awareness, and sustainability are largely discussed in today’s corporate world. ESG reporting sheds light on a company’s environmental, social, and corporate governance activities, a crucial requisite proposed by the FRC.

The pandemic stirred an active conversation about environmental changes and their impact on business. Therefore, monitoring whether additional ESG-related auditor guidance will be issued to firms in the new financial year will be crucial.

4. Professional Skepticism

Professional skepticism is at the heart of an audit. Following the massive audit failures of the past, it has become a heavily debated topic within and outside the accountancy profession.

In modern times, accountancy practices look for futuristic auditors with an advanced skillset, and professional skepticism is an integral part of it. This has further escalated the skills gap, which can be bridged with professional audit support services.

In the new year, audit firms are expected to put professional skepticism in the spotlight when hiring resources for their teams. In addition, firms may also focus on training auditors to negate cognitive bias, which can substantially influence their decisions.

Must Read: Why Auditors Need Objectivity and Professional Skepticism

Battling the Quality Crisis in the Audit World

The accounting and auditing industries are already faced with a massive skills gap. Per the latest statistics, almost half (49%) of UK accountancy firms have reported being significantly affected by the shortage of skills and resources. This crunch is a substantial contributor to the quality crisis in the industry.

In order to ensure high-quality audits, it is essential that firms employ and train auditors for futuristic skills. However, this can be a time- and cost-intensive task. This is where audit support and preparation services come into the picture.

Top accounting audit support providers open a vast talent pool for UK firms beyond geographical boundaries. Companies can, thus, hire highly qualified, trained, and experienced resources from any part of the world. These resources work dedicatedly on clients’ projects and their preferred software. They function as an extension of their in-house teams and help enhance the quality and productivity of audits.

Outsourced audit support professionals are certified and trained in UK audits with practical experience in the industry. They possess the essential skills of the modern auditor, which help minimise audit errors, detect fraud, and enhance quality.

Must Read: Harnessing Technology & Quality Control for Effective Audits

FAQs

1. What is the top audit risk in 2025?

The top audit risk in 2025 is the increasing complexity of regulatory compliance combined with the rapid adoption of emerging technologies like AI. Firms face challenges in keeping up with evolving standards, managing data security, and ensuring audit quality amidst these changes.

2. How can technology support my audit firm in 2025?

Technology can streamline your audit processes in 2025 by automating repetitive tasks, enhancing data analysis with AI, and improving accuracy and efficiency. It also strengthens compliance, boosts collaboration, and provides real-time insights to help your firm stay competitive and future-ready.