RegulationAccounting StandardsBIS warned on consequences of raising audit thresholds

BIS warned on consequences of raising audit thresholds

Government warned against increasing the range of businesses that are exempt from having an audit

BIS warned on consequences of raising audit thresholds

THE QUALITY of company accounts could deteriorate over the next ten years if the range of businesses that are exempt from having an audit is increased, experts have warned.

As part of changes to the EU’s Accounting Directive, voted through European Parliament earlier this year, member states can significantly increase the size of businesses that do not require audited financial statements.

Speaking at an ICAEW event in the City last week, Malcolm Bacchus, an institute council member, said accounts could “look worse than they are now” if audit exemption thresholds are further increased to include companies with a turnover below €12m (£10.3m) and a balance sheet below €6m.

“There’s a whole tranche of businesses I worry about,” Bacchus said, adding that the Department for Business Innovation and Skills (BIS) would need to monitor the quality of unaudited accouts filed at Companies House as any deterioation would happen over a long period. 

Last year, BIS aligned mandatory audit thresholds with range of businesses that can be defined as small, an thus exempt from an audit, under EU rules.

Companies are exempt from requiring an audit if they meet two out of three qualifying criteria – a balance sheet of less than £3.26m, turnover below £6.5m and fewer than 50 employees. However, a new paragraph introduced into the EU’s Accounting Directive earlier this year could effectively double the size company able to obtain an exemption.

EU member states have until 2015 to implement the directive, and BIS is expected to consult on any changes next year. However, accountants and capital providers are concerned about the implications such changes would have.

Stephen Pegge, director of group external relations at Lloyds Banking Group, expressed concerns that presenting audit “as a burden” and something that is “required by law other than something of value” was not “terribly helpful”.

Related Articles

Treasury Select Committee report released on Making Tax Digital

Accounting Standards Treasury Select Committee report released on Making Tax Digital

9m Stephanie Wix, Writer
New Year Honours of 2017

Accounting Standards New Year Honours of 2017

10m Stephanie Wix, Writer
Record fine for Deloitte and audit partner over Aero misconduct

Accounting Standards Record fine for Deloitte and audit partner over Aero misconduct

11m Stephanie Wix, Writer
ICAEW president: We must adapt to add to our heritage

Accounting Standards ICAEW president: We must adapt to add to our heritage

1y Richard Crump, Writer
ICAEW targets state of audit in consultation paper

Accounting Standards ICAEW targets state of audit in consultation paper

1y Fraser Simpson, Reporter
'Clear' tax avoidance guidance for advisers issued by institutes

Accounting Standards 'Clear' tax avoidance guidance for advisers issued by institutes

12m Stephanie Wix, Writer
Eight landmarks in the history of accountancy

Accounting Standards Eight landmarks in the history of accountancy

1y Acccountancy Age
Taking Stock: PwC outdoes ICAEW in the nibble stakes (steaks)

Accounting Standards Taking Stock: PwC outdoes ICAEW in the nibble stakes (steaks)

1y Taking Stock