On Tuesday, trade secretary Stephen Byers’ told the British Chambers of Commerce conference he would raise the threshold to £1m – for now – but added: ‘I have decided to remove the present statutory requirement for a full audit for all companies with a turnover of up to £4.8m – the maximum level allowed under EU law.’
But Peter Mitchell, chairman of the Small Practitioners Association whose members will be hit hardest by the rise, said the move was the biggest single change since the late 1960s and would dramatic restructure audit work.
Byers said for financial periods ending after 31 July 2000, the threshold would be raised to £1m. But once the Company Law Review reports next year, Byers it will rise to £4.8m.
Gerry Acher, chairman of the English ICA audit faculty, said: ‘I am 100% supportive of this approach.’
Small Business Service spokesman David Hands said: ‘When the government is feeling under pressure it makes an announcement to show it is cutting through red tape. But it is good to see the issue back on the agenda.’
The government estimates the increase to £1m will allow an extra 150,000 companies to take advantage of exemption producing annual savings for business of about £180m.
A rise to £4.8m would benefit an additional 75,000 companies.The Company Law Review steering group, which is due to publish final recommendations next year, has suggested that for companies in the range of £1m to £4.8m turnover, audit should be replaced by a less costly form of assurance.
Martyn Jones, Deloitte & Touche national audit technical partner, said: ‘If there is to be a form of independent professional review, it needs to be unshackled from registered auditor regulation so the reviewers can focus on straightforward procedures and client issues rather than documentation for regulations’ sake.’
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