BIS warned on consequences of raising audit thresholds
The range of businesses that are exempt from having an audit may be increased. This will ultimately result in the quality of company accounts deteriorating, experts have warned.
Changes to the EU’s Accounting Directive that were voted through European Parliament earlier this year, could see member states considerably increase the size of businesses that do not require audited financial statements.
Speaking at an ICAEW event 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 accounts filed at Companies House as any deterioration would happen over a prolonged period.
Last year, BIS aligned compulsory audit thresholds with range of businesses that can be defined as small, thus exempt from an audit, under EU rules.
Currently companies who meet two out of the three qualifying criteria are exempt from requiring an audit. The qualifying criteria are – a balance sheet of less than £3.26m, turnover below £6.5m and fewer than 50 employees. However, a new section introduced into the EU’s Accounting Directive earlier this year could effectively double the size of companies 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.
Article from Accountancy Age
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