In my career, I have been both a giver and receiver of audit reports. I began as a sole practitioner before becoming a partner in a firm. Now I am a non-executive director of a number of companies and a management consultant.
That means I have wide experience of the burden that red tape and regulation can impose on business, especially small business. It can severely inhibit profits, growth and an enterprise culture. Consequently, I welcome any government initiative that will genuinely reduce this burden.
Trade secretary Stephen Byers has promised a consultation paper on lifting the audit threshold from £350,000 to a higher level – possibly up to the £4.2m which is allowed under EU directives.
While I am happy for this specific issue to be reviewed again, it should be as part of a full and informed public debate, rather than as knee-jerk reactions such as I have seen in some of the public comments so far. There are differing, but genuinely held views about the level at which audit exemption should be set, and we need to draw those views out through consultation and debate. This means the views of the users as well as the auditors.
Clearly, removing the audit requirement will reduce costs but the benefit of the audit will be lost. I believe that the first step is to identify and debate all costs and benefits, both direct and indirect.
The next step is to see where the balance of costs and benefits lie. If the cost-benefit analysis favours an increase in the present limit of £350,000 to a higher figure, then the threshold should be raised to that figure, subject to certain checks and balances that might be required for financial services companies, minority shareholders and others.
Contrary to some press comments, I do not think raising the threshold is bad news for practitioners wanting to give constructive advice to help clients grow their business. It can help them focus their services in a way that is relevant to small business and is seen to be relevant by owner-managers.
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