PracticeAuditSmall company audit exemption is ‘close’

Small company audit exemption is 'close'

Audit exemption on small intermediary companies such as IFAs only months away from an agreement

Small intermediary firms are only ‘months’ away from having the requirement
on auditing their accounts scrapped in line with other small companies,
according to the Association of Independent Financial Advisers.

The Financial Services Authority and the AIFA have been locked in discussions
for several months with a view to removing the requirement on small intermediary
firms to audit their accounts, however, Chris Cummings, director general of the
AIFA said that both parties were closing in’ on an agreement.

‘Every regulated IFA firm has to complete online reporting called the
regulated mediation activity report that details the type of business and its
finances.

‘Removing the audit requirement would considerably cut reduce the regulatory
burden on IFAs and allow us to take advantage of the exemption in line with
other small companies.’

Under Companies House rules, small companies with a turnover of less than
£5.6m or a total balance sheet of £2.8m or less in any one year are exempt from
the requirement to submit – although this figure can reduce to £1m depending on
the company type – providing they have an average of 50 employees or less.

The exemption does not currently apply to financial services firms, however,
FSA rules stipulate the accounts of all financial firms must be audited.

Callum McCarthy, FSA chairman, and Kari Hayle, FSA director of finance,
strategy and risk, have been leading the discussions with the AIFA as well as
the Office of Fair Trading to see if such a move would be possible.

During a question and answer session at the City watchdog’s annual public
meeting, McCarthy said the exemption would ‘lighten the load’ and cost of
regulation on smaller firms.

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