Recent Changes to the Audit requirements
On 6 September 2012 the government announced key changes to company and LLP audit and reporting requirements. The changes removed the need for many more companies and LLPs to have an audit and they apply to financial years ending on or after 1 October 2012.
Prior to these changes, The Companies Act 2006 includes accounts exemption limits, whereby for financial years starting on or after 6 April 2008, to qualify for total audit exemption, a company must:
- Qualify as a small company
- Have a turnover of no more than £6.5 million
- Have a balance sheet total of no more than £3.26 million
To be a small company, at least two of the following conditions must be met:
- Annual turnover must be £6.5 million or less
- The balance sheet total must be £3.26 million or less
- The average number of employees must be 50 or fewer
The new regulations aligns mandatory audit thresholds with accounting thresholds, meaning SMEs can obtain an exemption if they meet two out of three criteria relating to balance sheet total, turnover and number of employees. These changes have exempted approximately 36,000 companies from compulsory audit.
The Government also exempts most subsidiary companies from mandatory audit, as long as their parent company guarantees their liabilities. A further 83,000 subsidiary companies can benefit. In addition, another 67,000 or so dormant subsidiaries no longer need to prepare and file annual accounts, provided they receive a similar guarantee.
The new regulations removes EU gold-plating and ensures UK SMEs are not at a disadvantage compared to their European competitors. These changes are part of the Government's wider drive to reduce unnecessary burdens and make the UK one of the best places in the world to start, finance and grow a business.
Kassim Harunani, Lawrence Grant Partner who specialises in financial reporting and company audits across a variety of industries says: In our experience we know that most businesses welcome and value audits as they can offer a valuable insight into how successfully a business is being run, and crucially, it also helps maintain business confidence by providing stakeholders with reliable financial information.
Kassim Harunani, Partner
Lawrence Grant, Chartered Accountants, 2nd Floor Hygeia House, 66 College Road, Harrow, Middlesex HA1 1BE
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