Audit eligibility requirements: Guidance note on Audit Regulation 2.03

New guidance published in February 2026 explains the updated eligibility requirements in Audit Regulation 2.03. This article explains the key information firms need to know to stay compliant.

The October 2024 revision of the Audit Regulations brought some changes to the eligibility requirements around the control of audit firms.  While changes were relatively limited in scope, they had a potentially significant effect on some firms’ eligibility.  

To help firms with continual monitoring of their eligibility, a further guidance note on the revised eligibility requirements was published in February 2026 as part of the wider selection of regulatory helpsheets and guidance. This explains the eligibility requirements set out in Audit Regulation 2.03.  

Compliance in this area is particularly important. Failure to meet the criteria can invalidate audit reports and expose firms to regulatory or disciplinary action. 

Key eligibility requirements relate to the status and qualifications of principals and the distribution of voting rights. In summary: 

• All principals must be members of ICAS, ICAEW, ICAI, ACCA or registered as Audit Affiliates.
• Any corporate principals must be notified to ICAS.
• All audit registered firms must be controlled by individuals with an audit qualification or another registered audit firm.

When assessing control rights, firms must consider any ‘super majorities’ that may be required for certain decisions. For example, special resolutions to amend a limited company’s constitution which by default would require 75% control to be held by audit qualified individuals.

Audit Regulation 2.03(d) also includes some specific provisions for limited company firms relating to the disclosure and transfer of shares.

Firms must notify ICAS of changes to their structure, principals or shareholdings within 10 business days, as these may affect audit eligibility.

If a firm temporarily fails to meet an eligibility requirement, it may be appropriate to request a 90day dispensation while corrective steps are taken. This is only granted where audit quality and the public interest are not at risk.

Changes to governance or corporate structure often require legal advice. Firms considering significant changes are encouraged to contact ICAS in advance, rather than waiting until 10 business days after changes have taken effect.

Eligibility is not a one-off assessment. Changes to a firm’s principals, control and ownership arrangements can impact whether a firm remains eligible to conduct audit work. Non-compliance with the eligibility requirements is one of the most serious issues identified in monitoring visits.

Firms should make sure they have a clear understanding of their circumstances and keep the ICAS Authorisations team up to date with any changes.

Further guidance is available from the ICAS Authorisations team if you’re unsure.