The Department of Business Innovation and Skills has confirmed that the mandatory audit thresholds should be aligned with accounting thresholds. This will allow SMEs to obtain an exemption from a statutory audit if they meet two out of the three current requirements. As a result of these changes, SMEs will be able to make a commercial decision on whether to have a statutory audit.
- Less than 50 employees
- Less than £3.26m total assets
- Less than £6.5m turnover
Previously companies required an audit if they breached either the turnover or assets thresholds.
As a result of these changes, SMEs will be able to make a commercial decision on whether to have a statutory audit. It is estimated that the changes will allow 36,000 companies to decide whether or not to have an audit. A further 83,000 subsidiaries will benefit and 67,000 dormant subsidiaries will no longer need to prepare and file annual accounts, provided their parent company also guarantees their liabilities.
These new limits apply to accounting periods ending on or after 1 October 2012 and there would appear to be nothing to prevent a company extending its accounting reference date to take advantage of these exemptions.
SMEs should begin assessing whether they satisfy two out of the three criteria required to be eligible for an exemption and if they do, they should be considering whether it makes sense to take advantage of this exemption. The advantages of having a voluntary audit can be significant, especially for those businesses that are having banking difficulties. Banks still frequently insist on audited financial statements as these improve the ability to borrow, sometimes at a reduced cost. Those firms looking to sell in the future may be required by funders or prospective buyers to have an audit for the assurance and credibility they bring. A firms credit rating can also be affected by not having an audit, this can have a detrimental effect for those organisations that rely upon tendering processes for work.
Our specialist team will be happy to talk you through your options in light of the recent changes.