Cable and the audit challenge
Vince wants to cut the cost of auditing and reporting for small and medium sized business, but are his savings estimates too optimistic
VINCE CABLE’s latest proclamations on small business and audit make interesting reading but I wonder whether these policy announcements emerged a little too early.
The general gist of the policy is to reduce the audit and reporting requirements for SMEs and therefore save them lots of money.
Readers of the story over the weekend quickly let accountancyage.com know what they thought of the proposals.
One made the observation that as audit standards have become increasingly complex, the number of companies subject to them has been systematically reduced which poses the question, who are they for?
The other observation is worth repeating too. Even as government might push to relieve the so called burden of red tape (is an audit red tape, I’m not so sure), there are those who will not exactly be in harmony with such a policy. As our readers point out, if a company goes to a bank looking for credit there is still a reliance on audited accounts as evidence that the company is worth backing.
Now many of you will know that using audited accounts in these circumstances can be a bit like relying on ancient history to tell us something about ourselves now. Audited accounts can date at a dizzying speed. A few weeks or months after sign-off and the world could have changed out of recognition. Things move fast in business.
Put that aside though. Banks will still require something to offer assurance and companies will still have pay for that, even if it isn’t statutory accounts. That will come from accountants. And that won’t come cheap. Consider this also. Given the faults inherent in relying an annual audit as proof of financial health, the pressure is for more frequent reporting, especially if the trade credit insurers have anything to do with it.
In short, the savings claimed by Cable in his statements – £40m for small business after cutting out audited accounts plus £400m on reducing the demands for reporting to Companies House – look optimistic indeed.
What’s more, much of this policy rests on pushing for changes to European legislation – it’s not even change that the government or Cable himself can control.