Auditing Requirements For SMEs

The Business Secretary Vince Cable has announced that SME businesses are set to benefit from the changes in reporting requirements, which will see more companies become exempt from mandatory audits, following a consultation on the proposed Audit Exemptions and Change of Accounting Framework.

At the moment, small firms must have no more than 50 employees, no more than £3.26m on their balance sheet and less than £6.5m in turnover to be exempt. But under the new regulation, SMEs will be able to obtain an exemption if they meet two our of three of these criteria, which is estimated will allow 36,000 more companies to chose not to have an audit.

Vince Cable said: ‘Reporting requirements have become increasingly demanding and costly over the years. We listened to business, who made a strong case for reform, and I am delighted that we are now taking this opportunity to make audit more flexible and targeted.”

The government will also exempt most subsidiary companies from mandatory audit, as long as their parent company guarantees their liabilities. A further 83,000 subsidiary companies fall into this category. In addition, another 67,000 dormant subsidiaries will no longer need to prepare and file annual accounts, provided they receive a similar guarantee.

In total, the changes to the audit rules are likely to save SMEs up to £390m a year in administration costs and fees according to the department of Business Innovation and Skills (BIS)

As an accountant in Bradford, Mark Wilcock specialises in offering accounting and audit advice.