ICAEW’s New Appraisal Requirements for Training Employers: What Firms Need to Know

In this episode, Lee Eagling (Technical Consultant at Mercia Group) discusses the new ICAEW requirements effective from July 2026, requiring authorised training employers to implement formal annual appraisals for partners, directors, audit staff, and students. The podcast explores the background to the changes, compliance expectations, practical implementation options, and why effective appraisal processes can deliver benefits beyond regulatory compliance.

For more information on this topic and more, please visit www.mercia-group.com for further details.

Transcript

Hi everyone, and welcome to this Mercia Podcast with me, Lee Eagling. Today we're gonna look at some newly introduced requirements from the ICAW regarding appraisals for authorised training employers. So what are these new requirements? In short, from July, 2026 ICAW training firms are gonna be required to have formal appraisals in place for key staff.

In particular that is going to cover partners and directors, as well as annual appraisals for students, members of staff and partners who work in audit. Why have these new requirements been introduced? Being candid and being honest, this is something that's gone a little bit under the radar and part of the reason that I wanted to talk to you today about this is number of views that working firms that are authorised training employees, you will have received some communication from the institute regarding this.

But I'm very mindful it's not something that we've seen published on broader channels and certainly not something that I think is commonly aware of across the profession. That could certainly impact a number of you and are very mindful that depending on the size and structure of your firm, the person or persons that have received the communication from the institute may not necessarily have shared that as, as far and as wide as they needed to within your organisations.

The broader background, and this is sort of information that we've got from some frequently asked questions that the institute themselves have published, is, this is off the back of an FRC project around developing the quality of auditor education and training. Now, again, I've not seen much publicly available around that, but clearly something that the institute has reacted to in response to something from the FRC.

What do the new requirements meet then? In a nutshell, if you are a partner or director in an authorised training employer, you will now need an annual appraisal. If you are a member of audit staff in an authorised training employer, you too will need an annual appraisal. And specifically for those of you working in audit, the requirements cover what they're calling the core audit behaviour.

So that's professional scepticism, professional judgement , and fraud detection. So what does this mean for you as a firm and individuals in certain firms? If you are a partner director, regardless of whether you work in audit or not, you're gonna have to think about how you are capturing this new annual appraisal requirement.

I think it's fair to say a number of firms that, that I work with be that on audit file reviews or broader compliance reviews, certainly practise Azure's reviews, audit compliance reviews, et cetera. It is fair to say that not many firms I go to have what I would call a formal process in place for partner or director appraisals.

Now, how does that work going forward? You could be very formal and implement a very formal, granular partner. Appraisal process or direct to appraisal process is that the partners, the directors buddy up with one another is that, that you potentially look to get an outside resource to help appraise your partners and directors.

That's potentially the case. The institute have been, I think, relatively open in the sense of, look, they are looking for formal documented review of an individual's performance, but they've not been too strict to, to fully mandate what that looks like. I think it's something for individual firms to take away and think about.

Again, this is very much my personal view here. I think for smaller firms, there's maybe only sort of 3, 4, 5 partners, maybe even a bit bigger. I'm moving a bit too. Over specific, there. I think there is a scope for this to be captured maybe as part of wider partner director meetings that you would have.

Typically. I think making sure that there is dedicated time, at least annually in some of those meetings, to formally appraise each other on an individual basis, whether that's, say, done as a one-to-one or a collective of, okay, we're now gonna discuss your individual performance.

Again, making sure that is formally documented. Again, for those of you that are in audit covers, those three behaviours that we touched on a little bit earlier, I think that is certainly scope to, to capture a formal appraisal and evidence it that way. Let's say it's gonna be a little bit of horses for courses here.

I suppose I'm more echoing the message that this is a requirement that's being introduced from July. Now, what have the institute said around this is that the institute has said that it's not, this isn't a process that they are going to be, say, leading on themselves. This isn't the ICAW performing the appraisal of, say, partners, directors and staff in your organisation.

It is the institute will be policing and checking that annual appraisal process has taken place. So I think for those of you that are maybe expecting an audit review in the coming certainly months, maybe next couple of years, for those of you that are expecting a broader practise assurance visit, I think from July onwards, this is something that the QAD will be looking at as part of their review process.

What does it mean for non IAW firms? I'm not aware that, say the likes of A CCA or ICAS have introduced similar requirements. I think it's worth keeping in mind that if this is the institute responding to a recommendation from the FRC, there will likely be similar considerations for other professional bodies as well.

So even if you're listening to thinking I'm not an ICAW firm, this isn't relevant for me, I think I'd see the bigger picture here and acknowledge if one professional body is responding to recommendations from the FRC, it is not building their realms of possibility that the other professional bodies will as well.

I think if I echo what I share on practises, who reviews that I perform, I think it's worth noting that I would say a formal appraisal process for partners and directors for all staff, regardless of grade or seniority in an organisation, is good practise. Again, that may look and feel slightly different for different individuals in different roles and different circumstances.

But again as I sit here recording this today, we're currently planning our annual appraisal process for our staff at Mercia. That is a proportionate design process to make sure that relevant to the grade that you are at, the role that you are performing, you are getting meaningful feedback on your performance to allow you to develop and respond to, to needs both of changes in technological circumstances, changes in technical requirements changes in maybe workforce management practises.

I think we have to be aware that the world around us is evolving, ever evolving, ever changing, and an appraisal is an effective way to capture how are you responding to those changes. This is something that you need more help and support with, and I think it's seeing an appraisal process as that way to help yourself constructively develop as an individual.

In this case, maybe develop yourself as a manager, as a leader in a business, as well as your technical development as well. So I think it's really important to see the value in an appraisal process and not just see it as a box that needs tick in. And I think that value is there to be obtained regardless of your position or grade in an organisation.

Thank you for taking the time to listen to this podcast. I hope you found it useful to sort it worthwhile sharing that as a new requirement that I say, certainly from our perspective has broadly gone under the radar for a large period of time. We thought it worthwhile taking the time to talk to you about it. I'll say thank you for listening. I hope you found that useful and look forward to speaking to you again soon. 

Take care everyone. Bye-bye.