PracticeAuditTwo-month wait for audit exemption

Two-month wait for audit exemption

Companies with a turnover of less than £5.6m will face a two-month wait before they are free from requiring an audit, the Department of Trade and Industry has revealed.

Bold: ‘Audit hike poses standards threat’

Regulations relating to the classification of small and medium-sized businesses, mentioned in the chancellor’s Pre-Budget report last year, were laid before parliament at the end of last week and will come into force on 30 January.

But there is a two-month delay until the audit exemption threshold comes into effect on 30 March.

This is to allow shareholders in smaller companies time to decide whether they wish the company they hold shares in to continue obtaining an annual audit, the DTI said.

The increase in the audit threshold from £1m annual turnover to £5.6m is expected to release around 69,000 companies from the obligation of an audit and could save UK business around £94m a year.

The main accountancy bodies, including the ICAEW, ICAS and ACCA, have all come out against the changes in the past, arguing that the regulations pose a threat to the standard of financial reporting. But critics have argued that the institutes are simply protecting their members interests, who stand to lose a great deal of revenue from the threshold rise.

The reclassification of small and medium-sized businesses will also allow more companies to take advantage of tax breaks on plant and machinery allowance and on IT allowance.

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