News In Focus
Government to cut small business audit requirements
10 September 2012
More small companies will be able to make a commercial decision about whether to have a statutory audit, under plans announced by Business Secretary Vince Cable.
Following the consultation on Audit Exemptions and Change of Accounting Framework, the UK Government has decided that mandatory audit thresholds should be aligned with accounting thresholds. This means that SMEs will be able to obtain an exemption if they meet two out of three EU criteria: they must have no more than 50 employees; no more than £3.26m on their balance sheet; and less than £6.5m in turnover.
It is estimated that as a result, 36,000 more companies will be able to choose not to have an audit.
The Government will also exempt most subsidiary companies from mandatory audit, as long as their parent company guarantees their liabilities. A further 83,000 subsidiary companies will benefit.
In addition, another 67,000 dormant subsidiaries will no longer need to prepare and file annual accounts, provided they receive a similar guarantee.
And following consultation by the Financial Reporting Council (FRC) on changes to UK Generally Accepted Accounting Principles (UK GAAP), the Government has decided to allow companies that prepare their accounts under International Financial Reporting Standards (IFRS) to move to UK GAAP and take advantage of reduced disclosures.
The new regulations will remove EU gold-plating and ensure UK SMEs are not at a disadvantage compared to their European competitors.
The regulations are expected to come into force for accounting years ending on or after 1 October 2012.
Mr Cable said: “Reporting requirements have become increasingly demanding and costly over the years. We listened to business, who made a strong case for reform, and I am delighted that we are now taking this opportunity to make audit more flexible and targeted."
Click here for the full Government response and associated documents.