As another year draws to a close, we would like to provide an overview of the most significant developments that shaped the auditing and accounting landscape in 2025 and suggestions on how small and medium-sized enterprises (SMEs) can position themselves for a well-prepared and successful 2026. The 2025 financial and regulatory environment has been dynamic and at times challenging for SMEs. From accounting standard updates to increased tax scrutiny and rapid digital transformation, businesses have had plenty to navigate this year.
- Developments in accounting standards and financial reporting
IFRS for SMEs: Continued modernisation
Throughout 2025, the International Accounting Standards Board (IASB) made meaningful progress on updates to the IFRS for SMEs Standard. Although simpler than full IFRS, the standard continues to move toward greater alignment in areas deemed essential for transparent reporting.This year’s areas of emphasis included:
- Revenue recognition enhancements
Increased clarity around performance obligations, variable consideration, and contract modifications, reducing inconsistency in how SMEs recognise revenue. - Financial instrument classification & measurement
Updates introduced clearer guidance in areas such as amortised cost measurement and impairment, echoing principles from full IFRS while keeping them streamlined. - Enhanced disclosure expectations
A stronger push for transparency around significant judgments, useful lives of assets, expected credit losses, and related-party transactions.
SMEs should evaluate internal policies and preparing for transitional requirements expected to take effect in the coming reporting cycles.
- Revenue recognition enhancements
- Audit and assurance insights for 2025
Internal controls under pressure
This year’s audit cycle highlighted several recurring internal control challenges within SMEs:
- Importance of segregation of duties, which remains a challenge in smaller finance teams
- Inadequate oversight of cash handling and petty cash
- Weaknesses in stock-count processes and inventory systems
- Gaps in approval workflows and delegated authority
- Increased reliance on a single individual for multiple financial functions.
In particular, cybersecurity controls became increasingly important as more SMEs adopted cloud-based systems. This included:
- Access control management
- Password and MFA policies
- Backup protocols
- Fraud-awareness training for staff.
Strengthening these areas reduces business risk and leads to more efficient audit processes.
Documentation and record-keeping
Items that could cause unnecessary audit delays and avoidable audit findings includes:
- Missing invoices and incomplete supporting document trails
- Expense allocations without proper explanations
- Loan agreements not updated for revised terms
- Depreciation schedules not aligned with asset registers
- Poor documentation for management estimates and assumptions.
Consistent monthly bookkeeping is key to ensure smooth year-end closure of accounts and contribute to an efficient audit process.
- Digital transformation gains momentum
SMEs increasingly embraced technology to streamline financial processes during the year. Popular tools included:
- Cloud-based accounting platforms (e.g., Xero, Sage, QuickBooks Online)
- Automated bank feeds and reconciliation tools
- AI-powered invoice processing and data extraction
- Digital document storage for audit readiness
- Integrated POS and stock management systems.
With these advancements, businesses are enjoying faster month-end closes and better access to real-time insights. However, this requires:
- User-access reviews
- Regular data backups
- Staff training on correct system usage
- Periodic financial controls testing.
Technology delivers efficiency but needs to be paired with strong governance.
- Preparing for the 2026 financial year
To set the stage for a successful year ahead, we recommend SMEs begin preparations early by:
- Completing all key reconciliations before audit engagements commence
- Performing accurate inventory counts and ensuring systems match physical stock
- Updating fixed asset registers, including impairments, disposals, and additions
- Reviewing contracts for revenue recognition and financial instrument implications
- Consolidating supporting documents in digital, organised form
- Preparing cash-flow forecasts and budgets early in the year
- Revisiting cybersecurity policies and user permissions
These steps not only improve compliance but also support better decision-making throughout 2026.
Closing thoughts
2025 was a year marked by regulatory refinement, increased tax enforcement, and rapid technological evolution. For SME, staying informed and maintaining robust financial controls was essential and continues to be so as we move toward 2026.
We look forward to supporting your growth, strengthening your financial reporting processes, and helping navigate an ever-changing business environment in the year to come.
Wishing you a restful festive season and a prosperous start to 2026.
If you have any enquiries, please do not hesitate to contact JC Laubscher from Broodryk Kotzé Inc at jc@bkaudit.co.za.