More companies to be exempt from audit
Gordon Brown and Patricia Hewitt's plans to raise the threshold for audit exemption have prompted concerns within the profession.
Link: The Debate: The audit threshold
The chancellor made the pledge to the CBI’s conference in Birmingham as part of a drive to cut unnecessary business regulations.
Brown said he would continue to resist moves towards tax harmonisation and unnecessary regulations from Brussels.
He went on: ‘And at home we will support this by – as trade secretary Patricia Hewitt has said – removing further audit requirements from more small firms and by making further cuts in the time and cost of VAT administration – and I invite you to nominate from your businesses men and women who will assist us in identifying and sweeping aside old regulations that have outlived their usefulness.’
The audit exemption threshold, along with the legal definition of small companies, will change in January. Small companies will be defined as companies with a turnover of £5.6m or below. The current threshold is £2.8m.
ICAEW president David Illingworth said that while the institute supported measures to rid businesses of red tape, the case for raising the threshold to £5.6m was not proved. He warned the rise to a £5.6m threshold would mean fewer companies would benefit from the services of a qualified accountant. ‘We need to be careful balancing deregulation against the fight against crime and money laundering,’ he said.
The ACCA argued that the changes will increase the risk of fraud. Deputy president John Brace said: ‘We fear that a large rise in the audit threshold will almost certainly lead to a decline in the quality of published financial statements. Companies House reports that 93% of the complaints it receives about the credibility of filed accounts concern audit-exempt companies.’