Practice Note 26 Guidance on smaller entity audit documentation (Revised) (PN26 (Revised)), published in December 2009, is designed to provide guidance to auditors on the application of documentation requirements contained within the clarified International Standards on Auditing (ISAs) (UK and Ireland) to the audit of financial statements of smaller entities.

Practice Note 26 will be withdrawn with immediate effect and the FRC will not issue a revision as it says example documentation is not in line with its ‘principals -based’ standards and guidance. In addition, audit of smaller entities is inspected by the Council and overseen by UK Professional Accountancy Bodies.

The FRC said: ‘The FRC does not propose to revise the Practice Note as the material relates to smaller entities, which are unlikely to be public interest entities, the audits of which are directly overseen and inspected by the FRC.

‘As smaller entity audits are usually subject to the inspection and oversight regimes of the UK Professional Accountancy Bodies, further guidance in this area may better fall with those bodies to develop.’

Report by Rob Munro