PracticeAuditNew audit threshold divides credit data suppliers

New audit threshold divides credit data suppliers

Commercial credit information suppliers are divided over the impact of changes to the auditing threshold applied to small businesses.

Link: The Debate: The audit threshold

From 30 January, the government raised the threshold for compulsory audits from £1m to £6.5m annual turnover, thereby allowing a further 69,000 businesses to slip through the net of a third-party examination of their accounts.

The move has put pressure on commercial credit information suppliers, who rely on historical archives of company audits to deliver their ratings.

Yet Experian’s MD of business information, Phil Cotter, was upbeat. ‘UK businesses need to be reassured that the raising of the audit threshold will not reduce the effectiveness of companies’ credit management activities.’

Cotter said that additional information sources are used to generate accurate and predictive risk scores. ‘We are capable of assessing the creditworthiness of companies of all type and size, including newly formed companies, ones without accounts and small companies.’

Rival credit supplier ICC, however, warned that the changes could result in billions of lost revenue, with companies at risk from fraud and credit unworthiness.

Ian Goodenough, MD of business information, said: ‘To make a decent credit risk decision, companies need data that has been audited by a bona fide third party. Allowing more companies to escape proper audit reporting procedures doesn’t help create reliable information.’

Goodenough said that ICC has helped set up an informal network of business information suppliers (including D&B, Equifax and Experian) to create ‘a single voice for suppliers of company financial data’. The British Information Providers Association intends to lobby government over legislation and measures that impact their businesses.

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