Pressures on public expenditure, new funding models and recent regulatory changes - which have all contributed to the changing landscape of the social housing sector - have prompted updated guidance for auditors of housing associations, published today by the Financial Reporting Council (FRC).

The regulator says reductions in grant funding, welfare reform and the impact on availability of funding following the financial crisis have led many housing associations to diversify their activities and funding models. Some have chosen to augment their traditional housing activities with more commercial activities such as student accommodation or care homes, while others have moved away from long-term bank financing to bond financing and an increased use of interest rate swaps.

The new guidance enables auditors to respond to these business risks and to identify risks of material misstatement of housing associations financial statements, the FRC says.

Nick Land, FRC board member and chairman of the audit and assurance council, said: 'Housing Associations provide some three million homes. Changes in recent years have given rise to potential business and audit risks that auditors need to be aware of when undertaking audits in this economically important sector of the UK economy.'

FRC's previous guidance for auditors was issued in 2006 and withdrawn in 2012 pending this revision. The updated guidance is now available in Practice Note 14 The audit of housing associations in the United Kingdom.

In an earlier consultation, the FRC said it would be starting with a 'blank sheet' when developing PN 14, which is more concise than the 2006 version and has a completely different structure and content. It deals with each of the four national regulatory regimes, rather than focusing on the English regime, and coves the background, regulation, business risks and audit risks affecting housing associations.

PN 14 can be obtained via this link HERE