The auditors argue that unpredictable trade tariffs make forecasting future profits difficult. This forecasting is vital for assessing whether a company is a going concern – expected to remain operational for at least the next 12 months – which is a key judgement when signing off financial statements.

Firms are reportedly seeking more time and specific rules for auditing companies significantly impacted by the trade disputes, noting that fundamental changes to business models and costs require lengthier verification processes. They draw parallels with the Covid-19 pandemic, when the FRC issued specific guidance adapting audit procedures to challenging circumstances, such as restrictions on physical stock checks.

While a recent UK-US trade agreement provided some relief for specific sectors like cars, steel, and aluminium, widespread uncertainty persists for many businesses with international operations.

The audit firms are expected to meet with the FRC soon to discuss their concerns. The FRC acknowledged its “ongoing engagement with audit firms on a range of issues relating to quality audit”. The Big Four firms declined to comment directly.