Why audit is good for business
Audit exemption presents two challenges: will the accountancy profession survive the removal of the regular income provided by the statutory audit?
And how will creative, visionary entrepreneurs retain financial credibility with the financiers and creditors?
Raising the audit threshold to £4.2m will exempt some 300,000 of the most dynamic and creative companies in the UK from the imposition of the annual audit. The challenge for the profession is to convince their former statutory audit clients of the value of converting to a voluntary audit regime.
Small-business owners, demanding ever-higher standards of service from their advisers, will only be persuaded to take advantage of the value-added audit service if it is in their commercial interest. Freed from the hand of control, the audit should then become a valuable asset: proof to third parties that the business is well run, as well as enabling the accountant to get under the skin of the business.
So how can accountants convince their exempt clients to continue with an audit?
First, assure your clients that your audits are unquestionably robust.
Second, let them know financiers tend to rely on the audit opinion to confirm financial integrity. After all, creative entrepreneurs are generally not blessed with the financial acumen of their accountant. Third, government departments such as Customs and the Revenue say they rely on the audit and may be more likely to give them an easier ride. The relevance of the anti-fraud, public-interest argument used in defence of the statutory audit is doubtful for most companies of this size and should be used with caution. The other defence, that it is cheap and cheerful so why not just keep it, misses the mark entirely.
The overriding reason for retaining the audit must be commercial. If a company is preparing to restructure, raise new finance, sell, float or undergo major reorganisation then the audit will be invaluable. Entrepreneurs will always put commercial interests first. If the argument for retaining the audit is logical, they’ll listen.
Teresa Graham is a partner with Baker Tilly and a member of the Better Regulation Taskforce.