Accountants urge caution on SME audit exemption

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.