The exemption limit debate rumbles on. It really needs someone to make the point that there’s no need to change, nothing’s broken and that the current system is perfectly okay – in a way that doesn’t signal a lack of horizon, protectionism or the train-spotter mentality. Unfortunately, it appears to be uncool to advocate the status quo. But I do advocate it and I’d like to explain why.
First, the exemption limit debate arises out of deregulation. When I look at the list of matters burdening businesses on a day-to-day basis it’s incredible that anybody thought of audit. Audit does not inhibit day-to-day operations of small and medium-sized businesses.
Second, there is the myth that audit stops us doing value-added work.
Rubbish. Proper accountants have been doing both for years. Accountants’ services are not rationed.
Cost? About 10% of the full service for a small company. Whoever came up with £5,000 a time needs their head examining. And the extra cost is balanced by a better standard of work all round by the adviser.
Audit doesn’t trace fraud? It’s not supposed to, it’s a deterrent. You don’t stop posting sentries because nobody slipped through the lines last night.
Why audit proprietorial limited companies? Because they’ve got other people’s money, that’s why.
Creditors, statutory authorities and so on. It’s called the public.
Looking at other positive arguments, audit means a qualified accountant and that means better quality. Small and medium-sized businesses need that quality because you can’t just rely on IT. So in pursuit of the true and fair view, accuracy and quality come as no-cost extras. Published accounts are the language of business and without audit that language is unreliable and untrue.
Audit keeps standards high. And as to value-added advice, how can we possibly do that unless we know the figures are right? Doesn’t it have to be on a proper foundation?
No. If you accept that filing accounts is essential, then policing is essential, or rubbish gets filed. Audit is the modest price of limited liability.
It’s time we stuck to our guns. Audit exemption is nonsense and we should stop being such wimps. The proposed lifting of the threshold is irrelevant and dangerous. It’s like abolishing the speed limit to solve traffic congestion. Like that proposal, it should be squashed.
Accountants deal in trust, based on honesty and openness. We should be proud of those qualities, and audit broadcasts them. Standards matter.
– John Malthouse is chairman of the English ICA’s General Practitioners Board.
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