UK BIS Minimizes Audit Related Requirements for SMEs
Over 100,000 businesses in United Kingdom can consider opting out of the annual auditing since the government is all set to announce plans pertaining to changing qualification related thresholds and reducing reporting and auditing requirements.
The response of the government on the consultation based on Audit Exemptions and Change of Accounting Framework has confirmed that now more organizations are at liberty to take a decision on whether or not statutory audit should exist.
Vince Cable, Business Secretary, BIS stated that the reporting related needs have reached a position where they are becoming very demanding as well as costly. The government paid heed to what businesses had to stay about reforming following it has resolved to make auditing procedure more targeted and flexible.
The alteration made to auditing related rules could save organizations as much as 2.4 million pounds every year in terms of fees as per the BIS (UK Department for Business, Innovation and Skills).
Presently, the eligibility for small companies to exempt audit in the United Kingdom is that they should be lesser than a specific size as far as their turnover and balance sheet is concerned. The fresh regulations will result in an alignment of compulsory audit related thresholds with financial accounting related thresholds. This means that small and medium enterprises will manage to acquire exemption only if they match 2 out of the 3 criteria pertaining to the total of the balance sheet, employee numbers and turnover. This particular change will enable as many as thirty six thousand organizations to exempt audit.
As per the existing thresholds, the small and medium enterprises that qualify for exemption must act in accordance with 2 criteria. One, they should not have over fifty employees, Two, their turnover should be below 6.5 million pounds and their balance sheet should not have any more than 3.26 million pounds on it.
Deloitte’s head of audit quality, Simon Letts stated that this initiative is innovative and they welcome it since it offers a lot of flexibility to organizations. He also mentioned that while the audit procedure allows a company to reassure their directors and shareholders, these advantages are not enough for wholly owned subsidiaries.