Cable: Reduced audits will help businesses to save millions of pounds
Business Secretary Vince Cable has said new rules over auditing and reporting requirements will help more than 100,000 companies in the UK to save millions of pounds every year in accountancy costs.
Following a consultation on Audit Exemptions and the Change of Accounting Framework, the Government has said it will allow more businesses to make their own decisions over whether or not to undergo a statutory audit.
Under current rules, small companies must be less than a certain size in terms of turnover and their balance sheet to be eligible for an audit exemption.
But when the new regulations come into place, they will align mandatory audit thresholds with accounting thresholds.
This means small and medium enterprises (SMEs) will be able to obtain an exemption if they meet two out of the three main criteria relating to balance sheets, turnover, and their total number of staff.
According to the Government, around 36,000 more companies will be able to choose not to have an audit when the new rules come into place.
In addition, subsidiary companies will be exempt from an audit as long as their parent company guarantees their liabilities. Around 83,000 subsidiary companies will be affected by the rule changes, it is believed.
Another 67,000 dormant subsidiaries will no longer need to prepare and file annual accounts, provided they receive a similar guarantee from their parent company.
The Government also announced that companies that prepare their accounts under the International Financial Reporting Standards (IFRS) but move to the UK's Generally Accepted Accounting Principles (GAAP) could soon take advantage of reduced disclosures.
The new regulations will remove EU gold-plating and ensure UK SMEs are not at a disadvantage compared to their European competitors, the Government says.
Of the Government's proposals, Mr 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.
"Tackling these problems will help save UK companies millions every year and free them up to expand and grow their business, which ultimately benefits the entire British economy."
Copyright Press Association 2012