Top 10 Audit-Ready Practices Under the UK Corporate Governance Code (2025 Edition)

While many of the changes are modest, the revisions place greater emphasis on internal controls, risk management, board accountability, and outcomes-based reporting.

Key Takeaways

1. Audit readiness begins with board accountability.
   The 2025 UK Corporate Governance Code requires boards to make explicit statements on internal control effectiveness and material control oversight.

2. Outcomes now matter more than intentions.
   Governance disclosures must focus on results of board decisions, not just processes—linking decisions to measurable business impact.

3. Internal control declarations demand evidence.
   Boards must maintain control testing records, remediation logs, and documented assurance to support their effectiveness statements under Provision 29.

4. Integrated assurance is the new standard.
   A four-lines-of-defence model—management, compliance, internal audit, and external audit—builds credibility and reduces duplication.

5. Culture and behaviour are now auditable themes.
   Boards are expected to show how corporate culture is monitored, embedded, and aligned with strategy, ethics, and risk appetite.

6. 2025 is the year to prepare for 2026 compliance.
   Early testing, dashboard reporting, and board-level alignment in 2025 will make the 2026 control declarations seamless and credible.

For companies aiming to be audit-ready and governance mature under the 2025 Code, here are 10 best practices—practical, implementable, and aligned with the new expectations.

1. Embed Outcomes-Based Reporting in Governance Disclosures

Why This Matters

One of the key shifts in the 2024 Code is stronger emphasis on outcomes-based reporting under a new Principle (Principle C) that governance reporting should “focus on board decisions and their outcomes in the context of the company’s strategy and objectives.”

This change encourages boards to go beyond describing what they intend to do (processes, structures) and more clearly articulate what actually happened, why, and whether it achieved the intended objectives.

Audit-Ready Practice

• Use a framework of “Objective → Decision → Action → Impact” for each major governance decision.

• Ensure that your narrative includes measurable indicators or metrics tied to board decisions (e.g. risk mitigation achieved, performance vs target, corrective actions).

• Tie disclosures to actual board minutes, committee reports, and post-implementation reviews to validate the narrative.

When your disclosures are directly traceable to board-level documentation, the audit and governance review process becomes smoother, and your narrative is less exposed to challenge.

2. Clarify Board Accountability Over Internal Controls & Material Controls (Provision 29)

What’s New

Provision 29 under the 2024 Code strengthens expectations around internal controls. From 1 January 2026, boards must include in their annual report:

• A declaration that material controls are effective as at the balance sheet date.

• A description of how the board has monitored and reviewed the risk management and internal control framework.

• Disclosure of any material control deficiencies that were not operating effectively, plus remedial action taken (or planned).

Note: The Code for 2025 still uses the 2018 Code, but companies should prepare now for the new expectations.

Audit-Ready Practice

• Map and document what your material controls are—including financial, operational, compliance, and reporting (non-financial) controls.

• Establish periodic (e.g. quarterly) control self-assessment and testing cycles with reporting to the Audit Committee or board.

• Maintain a control deficiencies register (with severity, remediation timelines, ownership, status).

• Ensure remediation actions are tracked, tested, and validated before the year-end, so the board can reliably declare effectiveness.

• Align internal audit and external audit inputs so the board’s declaration is grounded in assurance layers.

3. Maintain a Robust Four-Lines-of-Defence Framework

Why It Helps

A clear lines-of-defence model helps structure who owns, reviews, monitors, and assures risks and controls. It clarifies accountability and strengthens confidence for auditors and stakeholders.

Audit-Ready Practice

• Define roles and responsibilities explicitly across the lines:
   1. Operational management / control owners
   2. Risk & compliance / second line oversight
   3. Internal audit / assurance
   4. External auditors / regulators

• Formalize escalation paths and reporting lines.

• Use dashboards to show oversight of each line, control performance, significant issues, and remediation progress.

• Where possible, integrate assurance plans and reporting to reduce duplication and “audit fatigue.”

4. Strengthen Audit Committee Reporting & Minimum Standards

What’s Changed

The 2024 Code refines audit committee expectations and aligns them to a Minimum Standard for audit committees and external audit (issued separately).

Some prior disclosures are streamlined or removed, replaced by references to the Minimum Standard.

Audit-Ready Practice

• Review and update your audit committee terms of reference (ToR) to ensure consistency with the Minimum Standard.

• Ensure the audit committee receives timely, high-quality reports from management, internal audit, and external audit.

• Document the committee’s deliberations, key challenges, judgments, and follow-up actions.

• Ensure disclosure in annual reporting includes what the committee has done—concise but meaningful commentary on key audit matters, control issues, and interactions with external auditors.

5. Integrate Internal Audit into Governance and Assurance Strategy

Why It Matters

With heightened expectations on internal controls and board oversight, internal audit becomes more critical—not just for compliance but for early warning, culture, and continuous improvement.

Audit-Ready Practice

• Position internal audit as a trusted adviser, not merely a “police function”—involve it early in planning, risk reviews, and control design.

• Ensure the internal audit plan is risk-based, dynamic, and aligned to principal risks, control gaps, and business change.

• Use internal audit findings to input to the board’s control effectiveness view, remediations, and ongoing controls maturity improvements.

• Provide direct access for internal audit to the audit committee, and ensure its independence, objectivity, and competence are documented.

6. Focus on Culture, Tone from the Top, and Assurance of Embedding

Why Culture Now Matters More

The revised Code explicitly links governance to culture. Boards must not only assess and monitor culture, but also assess how the desired culture has been embedded in behaviour, incentives, and operations.

Audit-Ready Practice

• Integrate culture metrics and indicators (e.g. employee surveys, ethical incident trends, whistleblowing data) into board-level reporting.

• Require periodic assurance (internally or externally) on whether the culture and values are truly embedded across the organization.

• Tie performance management, remuneration, and incentives to cultural behaviours, not just financial KPIs.

• Document how the board has overseen culture: what assessments, what probing questions, and how board agendas reflect it.

7. Align Risk, Strategy, and Internal Control Design

Why Alignment Is Key

To be audit-ready under the new regime, internal controls must not be afterthoughts—they must be woven into strategic and operational planning. Controls must address material risks that threaten strategy execution.

Audit-Ready Practice

• Conduct a material risk assessment that links to strategic objectives and financial reporting risks.

• For each principal risk, map existing controls, control gaps, and key control enhancements needed.

• Design controls that are proportionate: not overly burdensome, but sufficiently robust for the risk.

• Allocate resources to high-risk or high-impact areas first.

• Regularly reassess and update control mapping when strategy, business model, or external environment changes.

8. Promote Real-Time Monitoring, Dashboards, and Exception Reporting

Why Real-Time Matters

Auditors and boards increasingly expect forward-looking insight—control exceptions should not only be identified in hindsight when the auditor arrives, but surfaced continuously.

Audit-Ready Practice

• Implement dashboards or “control health” indicators to monitor control performance, exceptions, and remediation status in near real time.

• Use exception logging or automated alerts for breaches or deviations—these feed direct oversight lines.

• Ensure that remedial controls are tracked and re-tested promptly—not just as an end-of-year action.

• Structure dashboards for different audiences (board, audit committee, control owners) so each sees relevant metrics.

9. Document Judgments, Assumptions, and Key Estimates Transparently

Why It’s Critical

Governance and audit review often hinge on judgments, estimates, and management assumptions (e.g. impairment, provisioning, contingent liabilities). Poor documentation of these invites challenge and scrutiny.

Audit-Ready Practice

• Create standard templates for documenting key estimates: what assumptions were used, sensitivity analysis, alternative scenarios, and rationale for selection.

• Retain board or audit committee discussion records (e.g. minutes) reflecting challenge, stress testing, sensitivity analysis, and follow-through.

• Link your narrative disclosures in the annual report to these documented estimates and sensitivities.

• Ensure that management and audit can cross-reference the estimate documentation, governance review, and final disclosures.

10. Undertake a Formal Pre-Close Internal Controls Review

What This Entails

Before financial year-end close, perform a pre-close internal controls review to test whether key controls are functioning. This gives management and the board confidence going into year-end audit.

Audit-Ready Practice

• Identify “key controls” (manual and automated) across financial reporting and material operational/ compliance areas.

• Perform walk-throughs, control tests, and scenario-based checks shortly before closing (e.g. in the final quarter).

• Document findings, remedial actions, and retesting prior to finalizing year-end accounts.

• Use results to feed into the board’s internal control declaration and audit planning.

• Share results (or summary) with internal and external auditors early to avoid surprises and build trust.

Putting It All Together: Governance Workflow for Audit Readiness

To operationalize these practices, consider a governance-to-audit readiness workflow across the financial year:

1. Annual Risk & Materiality Assessment
   At the start of the year, map risks, strategy, controls, and assurance plans.

2. Control Design, Documentation & Ownership
   Build, document, and assign ownership of controls; map them clearly to risks.

3. Ongoing Control Monitoring & Exception Reporting
   Use dashboards, exception alerts, self-assessments, and second-line reviews.

4. Internal Audit Assurance & Follow-Up
   Internal audits execute risk-based plan, report findings, and track remediation.

5. Pre-Close Control Testing & Validation
   Perform pre-closing tests, identify gaps, and remediate before year end.

6. Board & Audit Committee Oversight & Reporting
   Periodic updates, challenge sessions, decision logs, and mid-year reviews.

7. Year-End Declarations & Disclosures
   Board signs off on control effectiveness declarations, narrative disclosures, and audit committee reports consistent with published reporting.

8. External Audit & Assurance Integration
   External auditors review internal controls, estimate judgments, disclosures, and governance narrative.

9. Post-Year Review & Continuous Improvement
   Analyze audit findings, external feedback, control failures, and lessons learned. Iterate.

10. Plan for Next Cycle (2026+ with full Provision 29 in force)
    Incorporate enhancements, new expectations, and stronger assurance cycles for future periods.

Challenges to Anticipate & Mitigation Strategies

Why These Practices Produce Value (Beyond Compliance)

While achieving audit-readiness under the new Code is non-negotiable for listed organisations, these practices also create broader benefits:

• Stronger investor confidence & credibility
  Transparent disclosures and disciplined control frameworks reduce reputational and financial risk.

• Better alignment between strategy and execution
  When controls are linked to strategy and outcomes, the board has clearer insight into execution gaps.

• Proactive risk oversight
  Real-time monitoring and pre-close reviews surface risks early rather than at audit time.

• Reduced audit friction & costs
  When auditors can rely on management’s documented testing and control performance, audit cycles can be more efficient.

• Continuous improvement culture
  A mature control environment drives iteration, learning, and resilience, not just static compliance.

Final Thoughts & Action Plan

The 2025 transition period is a strategic opportunity. While the full requirements of Provision 29 (control declarations) only kick in from 2026, companies should use 2025 to prototype, test, and enhance control frameworks so they are fully prepared.

Here’s a high-level action plan:

1. Gap assessment: Against the ten practices above, perform a gap analysis.

2. Board and audit committee alignment: Socialize the changes, gain buy-in on control definitions, and decide on oversight cadence.

3. Pilot control cycles: Run one or two control cycles and remediation runs in 2025.

4. Enhance reporting & dashboards: Build or refine systems to support real-time control dashboards and narrative-report linkages.

5. Train control owners & embed accountability: Clarify ownership, escalation, and performance expectations.

6. Coordinate assurance: Align internal audit and external audit plans with the governance agenda.

7. Iterate and mature: Continuously review control design, monitoring, and narrative disclosure processes.

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Frequently Asked Questions (FAQ)

1. What is the biggest change in the 2025 UK Corporate Governance Code?

The key change is the strengthened Provision 29, which requires boards to declare the effectiveness of material internal controls and disclose any deficiencies, starting from financial years beginning 1 January 2026.

2. How should companies define “material controls”?

“Material controls” refer to controls that address risks capable of materially affecting the company’s financial statements, operations, or reputation. Boards should agree clear criteria—based on financial thresholds, regulatory exposure, or stakeholder impact—and document this rationale.

3. What does “outcomes-based reporting” mean?

Rather than describing governance structures or intentions, companies must report on what actions were taken and the outcomes achieved. This ensures reporting reflects board effectiveness and value creation, not just compliance.

4. How can mid-sized UK companies prepare for audit readiness?

Start with a gap assessment against the 2025 Code, identify material controls, set up a control self-assessment cycle, maintain a deficiencies register, and document oversight in audit committee minutes and dashboards.

5. What is the role of the audit committee under the 2025 Code?

Audit committees must operate in line with the FRC’s Minimum Standard, overseeing internal control monitoring, auditor independence, and disclosure quality, while reporting transparently on their key activities and findings.

6. When do the new requirements take effect?

The revised UK Corporate Governance Code applies to financial years beginning on or after 1 January 2025, with the new internal control declaration requirement effective from 1 January 2026—giving companies a one-year preparation window.