Audit Exemptions For Small Business from 1 October 2012
11 September 2012
The Government has announced changes to reporting and auditing requirements that will allow more small companies and subsidiaries to decide whether or not to have an audit.
The Department of Business Innovation and Skills confirmed on 6 September that small businesses will not need to subject their accounts to an audit if they meet two out of the three qualifying criteria for small company accounts:- Fewer than 50 employees
- Balance sheet total: no more than £3.26m
- Turnover below £6.5m.
It is thought nearly 120,000 companies may be able to take advantage of the exemption, saving them an estimated £390 million in audit fees and reporting requirements which have become increasingly demanding and costly over the years.
Subsidiary companies will be let off mandatory audits if their parent companies guarantee their liabilities. It is estimated that this would affect 83,000 subsidiary companies. Additionally, up to 67,000 dormant subsidiaries will no longer need to prepare and file annual accounts, provided they receive a similar guarantee.
The changes, announced by Business Secretary Vince Cable in response to the consultation on 'Audit Exemptions and Change of Accounting Framework', also make it easier for companies to move from IFRS to UK GAAP.
Commenting on the BIS announcement, Henry Irving, Head of ICAEW's Audit and Assurance Faculty, said:
"ICAEW supports a deregulatory approach to stimulate sustainable growth. However, it is crucial that smaller businesses remain focused on having strong financial controls and appropriate management oversight, as that is critical for business confidence, which - in turn - is vital for growth.
"Audit and other types of third party assurance play a key role in instilling confidence. Being able to produce independent verification of the company's financial statements can be important for securing finance, for example. Therefore, companies that may be exempt under the new regulation may still choose to have an audit done.
The regulations are expected to come into force for accounting years ending on or after 1 October 2012.
Should you have any questions about audit exemptions or related issues you can contact Ruairi Maginn in our Lurgan office or by e-mail at: ruairi@dalypark.com ; or Darragh Cotter in our Newry office or by e-mail at darragh@dalypark.com .