100,000 SMEs may escape audit requirement but lenders will still want accounts

In October, the Department for Business, Innovation & Skills announced a consultation which could exempt 100,000 small and medium-sized enterprises (SMEs) from the requirement to be audited.

The consultation concerns a proposal to align British thresholds, presently defined as turnover up to £6.5-million and total assets of no more than £3.26-million, with EU small business thresholds.

Currently, SMEs have to meet both turnover and balance-sheet thresholds to escape an audit, but if the proposal is adopted they must meet two of three criteria of being below a set turnover, balance-sheet total and number of employees.  Moreover, since EU thresholds are set in Euros, UK limits could well increase because of recent exchange rate movements.

For thousands of SMEs just over the current thresholds, this promises relief from the distraction of an audit and the bonus of time spent earning rather than reporting. But it is unlikely to remove the requirement for independent accounts by banks and other providers of finance.

We would in any case advise businesses to maintain financial controls in the present climate and keep records up to date.  One of the benefits of a full statutory audit is a trustworthy, independent review of your business’s financial health to give confidence that all is well and working as it should.

Even if a statutory audit is not required, whether by law, bank or stakeholders, we can usefully provide an assurance report on accounts and processes, tailored to directors’ requirements, to provide the maximum benefit.