Key updates to academies financial reporting and audit guidance for 2024/25

Following the closure of the Education and Skills Funding Agency (ESFA) on 31 March 2025, the Department for Education (DfE) has released updated versions of the Academies Accounts Direction, the Framework and Guide for External Auditors and Reporting Accountants and the Academies Model Accounts

These updates introduce several changes aimed at improving financial reporting and audit clarity for academy trusts.

Academies Accounts Direction 2024/25

• Transfer of Functions to DfE: With the dissolution of the ESFA, all references in the Accounts Direction have been updated to reflect the DfE as the responsible body.
• Alerting Academy Trusts to the Companies Act 2006 Requirement: Academy trusts are now reminded of the Companies Act 2006 requirement to include a non-financial and sustainability information statement within the strategic report. This requirement applies if the Academy Trust’s turnover in the year was more than £500 million and the Academy Trust had 500 or more employees.

Academies Accounts Direction

Framework and Guide for External Auditors and Reporting Accountants 2024/25

• Inclusion of Engagement Letter Provisions: The guidance now specifies mandatory clauses that external auditors must include in their engagement letters, outlining the scope, responsibilities and liability limitations.
• Regularity Reporting Framework: Annex C has been revised to reflect current regulatory expectations, providing auditors with updated procedures to assess and report on regularity within academy trusts.

Framework and Guide for External Auditors and Reporting Accountants

Academies Model Accounts 2024/25

• Internal Scrutiny Requirements: trusts with an annual revenue income exceeding £50 million must implement a dedicated internal audit function, as required by the Academy Trust Handbook 2024. This requirement will take effect from 1 September 2025.
• Standardised Financial Statement Presentation: Further refinements have been made to improve consistency across academy trust financial statements, aiding comparability and transparency.

Academies Model Accounts

How can Mercia help?

These revisions provide external auditors with a clearer and more structured framework, making the auditing process more efficient and transparent. The inclusion of specific engagement letter provisions enhances understanding between auditors and academy trusts, reducing the risk of misinterpretation and ensuring compliance with evolving financial oversight requirements.

Mercia’s range of audit methodology products includes robust acceptance and continuance procedures. We also offer a range of other support services, including file reviews (whether hot or cold) and answering your technical queries. Our extensive range of training courses may also be of benefit.