FORMER ICAEW chief executive Eric Anstee has raised concerns that small businesses will struggle to gain access to finance without externally audited accounts.
As the audit threshold has continued to climb, pushing smaller businesses outside of the audit remit, the reliability of their accounts "is brought into question".
The process by which they can gain access to finance is slowed as they look to have the financial statements externally verified.
"It would be much better if they had properly signed off accounts in the first place," said Anstee.
"When they have consulted with accountants, then it's good. The problem is that SMEs come to us (for funding) before speaking to them."
He was speaking to Accountancy Age after the business of which he is CEO, City of London Group, was one of four firms to be awarded a multimillion-pound ‘mandate' by the government to invest into SMEs.
Under the scheme, launched by the Department of Business last week, it will match 1:1 with funding providers – with up to £110m up for grabs.
However, Antee warned that a lack of gearing made the government's funding less attractive: "It makes it difficult to raised private sector money."
Mr Anstee is so wrong to suggest audit for small companies. The cost involved will out weigh the benefit as the banks still will not lend. The accounts prepared may not be audited but they give a very true picture of the firms finances presented to the banks.
Posted by: michael, 20 Dec 2012 | 08:56
The problem with unaudited SME accounts is that many accountants no longer take the care they should in preparing unaudited accounts: outsource it to India, process it, don't look for problems and get it out of the door at maximum profit.
We have taken several new clients from larger local and mid tier firms recently and the quality of the work done is in some cases attrocious.
Proper reviews, trained staff, thorough monitoring and a return to professional pride and standards would be a more appropriate response.
Posted by: John Smith, 20 Dec 2012 | 08:59
Mr. Anstee is talking rubbish. The banks already have trust in accounts prepared by qualified accountants and as such the extra £2,500 to audit a small company is a complete waste of money that the business doesn’t have. Besides, the banks are more likely to rely on a company’s cash flow, business plan, product, market trends and track record when deciding whether to lend. Moreover if a bank requires an audited financial statement it can always ask for one. Not every business needs to borrow to survive, in fact only a small proportion do. So how can you burden everyone with the needs of a minority? Businesses and their accountants have been clamouring for years for less regulation not more. Mr. Anstee should go back to school and stop talking rubbish.
Posted by: John Brown, 20 Dec 2012 | 11:31
While I certainly see where Mr Anstee is coming from (lenders do want to see signed off accounts from firms accessing finance) I think the way lenders will access financial data is changing. In the not too distant future they will be accessing it through the growing number of APIs that cloud accounting providers like Xero have built. Obviously this will require the user's consent (something they will give in order to access the finance they need) but it will be much more useful to lenders when assessing a business's creditworthiness than audited accounts. This process becomes more and more likely as cloud accounting takes off in the UK over the next 12 months.
Posted by: Joe Carstairs - Funding Options, 08 Jan 2013 | 15:23
In our experience bank managers don't understand the difference between audited and unaudited accounts. They frequently ask for audited accounts for sole traders and partnerships!!
Posted by: Derek, 10 Jan 2013 | 13:30
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