The new audit threshold is part of a package of measures designed to bring the definition of small and medium-sized companies into line with European definitions.
But hopes for a cap on auditor liability have receded as the government made it clear that the proposals still need to be worked on.
Under the audit exemption proposals, the small company turnover limit would rise from £1m to £5.6m and the medium-sized company limit will increase from £11.2m to £22.8m, creating 66,000 more small companies.
DTI minister Jacqui Smith said the moves would benefit smaller companies. Far fewer would require statutory audits and more would be able to take advantage of tax breaks.
Jonathan Beckerlegge, chairman of the ACCA’s auditing committee, said the move would ‘disenfranchise’ small shareholders of small companies. ‘Frankly we find it very hard to comprehend how a government, which is committed to enhanced financial reporting and shareholder protection for large listed companies, can contemplate a move that can only have an adverse impact on independent shareholders in smaller companies.’
ICAEW chairman David Illingworth said: ‘While the proposals have the potential to ease regulatory burdens on small business, there needs to be a careful balancing of the potential benefits of an increase in the audit exemption threshold with the possible drawbacks, which will impact on a range of stakeholders, including those representing the public interest.’
Meanwhile the drive by the profession to secure legislation passed to limit auditor liability has hit a setback after trade and industry secretary Patricia Hewitt admitted more work was needed before the company law bill could be put before parliament. She said it ‘will be introduced as soon as parliamentary time permits’, though a cap will now be included in the bill mentioned in the Queen’s speech.
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