MID-TIER FIRMS are cautious in the face of government plans to raise the audit exemption threshold for small companies, saying the value of audit should not be dismissed in the rush to save money.
ReesRussell partner Jonathan Russell said: "Previous reductions in audit requirements have not all led to savings but a realisation that much of the audit process can be valuable."
The Department for Business, Innovation and Skills claims the plans could save more than £600m a year for 100,000 of the smallest companies, by widening the definition of audit-exempt business and allowing subsidiaries to cease audit in certain cases.
David Ingall of JWPCreers argued there might be "less in this than the headlines imply", saying: "I am concerned that it is only 100,000 businesses."
Business network the Institute of Directors was more positive, arguing allowing companies to decide whether an audit is necessary will give them "more flexibility to save on a cost ... in these difficult times".
Russell also touched upon this, saying: "The good thing from the advisors' point of view is that any service provided can be tailored to the client to give real benefit."
Others were unconvinced by plans to exempt subsidiaries from audit if the parent company can guarantee their debts.
Mario Cientanni of chartered accountants Barnes Roffe said the proposal "sounds great at first", but concluded: "I can't see the commercial justification for holding companies to guarantee their subsidiaries' debt. The condition required to win the exemption will dissuade many groups from seeking it."
Stakeholders have until 29 December to comment on the BIS consultation.
On the one hand the government is concerned about audit concentration in the big four and on the other intends to reduce the audit market for the smaller accountancy firms.
This will reduce the size of the audit department at the mid-tier firms, reducing their capability. Furthermore, smaller audits provide good training material - staff capable of senioring the audit of a small client might only be doing the debtors section at a larger one.
This will be even more pronounced at the small firms. Many only take on ICAEW/ICAS trainees through the audit department. Many of these trainees, once qualified, move on to the larger firms.
None of that is any justification for imposing unnecessary expenses on SMEs, but government does not seem to realise that changing demand leads to structural changes in supply.
Posted by: Dave, 08 Oct 2011 | 13:05
By definition, a cost-effective audit should add reassurance & value in system efficiencies, each and every year.
Only poor management will view this as a needless cost & distraction... a bit like their poor customers !
Posted by: John Stewart, 10 Oct 2011 | 15:23
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