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16 Mar 2011
VINCE Cable's proposals for small company audits have been described as being "naivety that verges on madness," by the chief executive of the Institute of Credit Management.
In a letter to the Guardian Philip King writes that Cable's proposal to remove audits for 42,000 small companies in a bid to save them £40m is a move that could damage a company's access to credit.
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"Far from helping small businesses, the move is more likely to damage a company's access to credit, therefore restricting growth and in fact adding to their costs.
"The government needs to get away from this idea that reducing red tape will always mean reducing costs to small businesses.
"Businesses extend credit to one another based on the trust that comes from knowing that the company is financially viable, and one of the essential proof points is a set of audited accounts," King said.
There has been a strong reaction to Cable's proposals but much of it relies upon EU approval.
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Visitor comments Add your comment
VIable Accounts
Correct me if I am right, but surely the history of major failure rarely comes from a set of audited accounts.
Enron, well know major banks both past and present spring to mind.
You cannot beat up to date financials coupled with management accounts and an understanding your prospective clients business model.
It is not so long ago that the sum of ALL audit income was matched by the sum of outstanding litigation!
I feel that Philip Kings observation that Vince Cable's proposals are "naivety that verges on madness," is widely off the mark.
Posted by: Kieran Marsh MSc FCMA, 16 Mar 2011 | 11:48
VIable Accounts
Correct me if I am right, but surely the history of major failure rarely comes from a set of audited accounts.
Enron, well know major banks both past and present spring to mind.
You cannot beat up to date financials coupled with management accounts and an understanding your prospective clients business model.
It is not so long ago that the sum of ALL audit income was matched by the sum of outstanding litigation!
I feel that Philip Kings observation that Vince Cable's proposals are "naivety that verges on madness," is widely off the mark.
Posted by: Kieran Marsh MSc FCMA, 16 Mar 2011 | 11:48
No credit from me
My company will not give credit to a limited company without audited accounts - period.
Posted by: Mark Bennett, 16 Mar 2011 | 15:34
Load of tosh
If you need finance can't you just get your accounts audited????
Posted by: Jonboy, 16 Mar 2011 | 17:03
ICM King
Audited accounts are often meaningless as they are so far out of date when published.
So why force small companies into producing them other than to continue employing chartered accountants who tend to deal in history rather than reality.
Posted by: Brian Richards, 16 Mar 2011 | 17:58
Harsh but true?
Jonboy, fair comment when finance is ongoing or the finance is being arranged near to the year-end. However what happens if it's happening mid year and you have e.g. stock?
You'd then have to prepare interim accounts (if the bank will accept those) and audit them, likely at much greater total cost. This would also take a significant amount of time (months) by which point the company may have collapsed for lack of cash.
I don't intend to support or criticise either King or Cable's argument, setting the exact audit thresholds requires balancing many considerations.
Posted by: Dave, 16 Mar 2011 | 18:47
governance
I have long thought that Cameroon and co could not run a whelk stall - audited or not.
Posted by: mike, 16 Mar 2011 | 19:10
naivety verging on madness
As a director of a company supplying capital equipment we are unable to sell without trade indemnity insurance cover. With most companies now reporting losses and shrinking Balance Sheets our sales volumes are also shrinking. The RH Vince Cable`s proposal of help is more akin to trying to fix the damaged Japanese nuclear power stations with kiddies playdo than lunacy.
What we really need is real solid, three dimensional help in the form of a government administered export guarantee scheme.
Posted by: Tony, 16 Mar 2011 | 19:23
Audited accounts are a costly waste of time for SMEs
Directors are responsible for the statutory accounts and good internal systems (essential for running any business) together with a good qualified accountant taking a commercial and pragmatic approach, should alleviate the necessity for a costly box tickiing exercise which adds no value to an SME.
Posted by: Colin Glass, 16 Mar 2011 | 21:05
Bring back the audit for all small companies
Its high time we brought back the audit for all small companies. Given the banks reluctance to lend to small businesses, they need now more than ever, more credible independent financial scrutiny of information on whch to base thier lending.
Its more scrutiny and not less red tape that needs to be addressed.
Posted by: G.A.Butt FCCA CPA, 17 Mar 2011 | 12:16
Current Siuation
I am rather peplexed here in that I thought small companies did not require an audit report at all under current legislation. A turnover of less than around £6m means that a company does not require an audit. Some companies do have their accounts reviewed for credit reasons, and this seems to work well unless anyone knows to the contrary. If there is an increase in this turnover level I do not see it as a problem, provided companies produce full acounts signed off by the directors. They can then ask auditors to review them if required for credit purposes, or indeed have them audited.
Posted by: Donald Morris BSc MSc FCA, 20 Mar 2011 | 14:39
Cable's remark on small business audit
I am a treasurer of a small company ,managing a block of flats.(52) the lease stipulates an audit. if the accounts were not audited a number of important issues would not have been tackled. the going concern issue concentrates the minds on the continuing upkeep of the buildings. our auditors help has been invaluable. charles judd
Posted by: charles judd, 31 Mar 2011 | 12:07