One year on from the introduction of new audit exemption thresholds, many small companies will have decisions to make as they are now free from the audit process.
David Minett, a partner at leading north-east firm James Milne Chartered Accountants, discusses how the new audit rules could affect these companies.
He explained: “An increase in the audit exemption threshold was announced by the UK government at the start of last year, when it was confirmed that all companies classed as small for reporting requirements will be exempt from audit.
“The threshold for turnover has now risen to £10.2m and total assets to £5.1m whilst the number of employees remains at 50. This means that many companies will now be coming out of audit and it is the perfect opportunity for them to reassess their financial needs and ensure they have the best fit for their business.”
It has been estimated that the change will remove around 7,400 companies from the requirement to have an audit and it is thought that many will seek alternative routes to ensure that their internal systems remain robust.
The key is to assess all your options and ensure you have the best accountancy support for your business, taking expert advice on board.
David said: “We would always recommend that a company has its annual accounts prepared by a firm of Chartered Accountants, and the change in audit thresholds, for some, gives a chance to look at all the options out there, and find the right match for your business.
“Chartered Accountants are governed by the ethical rules of their professional body and can offer the expertise and guidance to ensure accounts are professionally prepared.
“Some firms will make the decision to retain the audit function, but it is integral that whatever decision is made, that financial reporting standards are accurately maintained. For instance, banks and external funders may insist on audited accounts for a number of strategic reasons, such as raising finance.
“While some companies will choose to stay with bigger accountancy firms because, for example, the ancillary services being provided are more important to them than the audit function, others will look around and find a new firm for their changed needs. At a time when people are looking at costs, this is an invaluable exercise and one we would recommend. Don’t forget, directors remain responsible for the preparation and integrity of the company accounts.”