Shropshire firms should tread carefully over auditing red tape cut
Shropshire firms may need to take a fresh look at their auditing and accountancy requirements following a key regulatory change by the Government, according to county experts.
Subject to approval from Parliament, from October this year up to 36,000 companies nationally will be able opt out of having a statutory audit and around 67,000 dormant subsidiary companies may not have to file annual accounts.
The Department for Business, Innovation and Skills announced the changes in a move intended to strip away some 'gold plated' standards that were seen to put UK firms at a disadvantage to European counterparts.
Ian Davies, a partner at Tranter Lowe Chartered Accountants, which has offices in Wellington and Dawley, greeted the change as a simplification of a demanding regulatory framework, but said companies potentially covered by the new rules would need to consider their positions carefully.
Existing legislation says that SMEs can qualify for an exemption from auditing if they have a maximum balance sheet total of £3.26m and less than £6.5m turnover. The new legislation will allow this exemption if an SME meets two out of three criteria relating to their balance sheet total, their turnover or whether they employ less than 50 staff.
Mr Davies explained: “The change will take quite a lot of companies out of the need to be audited and I'm sure some will welcome that. But before firms make any move they need to check that they are confident they fully comply with the exemption requirements.
“There's also a quite important consideration about whether, exempt or not, they might be well advised to continue with their existing auditing regime, because this process gives much greater strength to their financial controls and the overview that management has of the health of the business. It can also be important to produce independently audited records when seeking finance. In short, though you may not need an audit for accounts filed for an accounting year ending on or after October 1 this year, you might be be advised to continue having one anyway.”
Other key features of the legislation change that may appeal to firms include the removal of up to 83,000 subsidiary companies from auditing requirements, as long as the parent company guarantees their liabilities, and the removal of the need for dormant subsidiaries to prepare and file accounts, subject to the same guarantee from the parent.
Mr Davies added: “Every company has different need for different reasons, so it's always wise to ensure you have good advice before changing practices based on revised legislation. You need to make sure every move is the right move for your particular business.”
