Audit exemption thresholds have been relaxed reducing the burden on many small businesses. An audit is an independent and unbiased assessment of the financial statements. Currently, companies have to be audited if they have a turnover of more than £6.5 million or a balance sheet total of more than £3.26 million.
The main purpose of an audit is to give shareholders and other external stakeholders peace of mind that the figures included in the accounts are accurate and show a ‘True and Fair’ view. As many small companies are owner managed and there is less of an external dependency on the figures the need for audited figures is reduced.
The rules are being relaxed enabling an estimated extra 120,000 companies to claim audit exemption. Although companies can still choose to be audited if they wish.
The new thresholds will apply to companies with accounting year ends on or after 1 October 2012. Companies will be able to claim audit exemption if they satisfy two of the following criteria; turnover of less than £6.5 million, balance sheet total of less than £3.26 million and less than 50 employees.
It is said that the relaxation in the thresholds will save small companies millions per year and free them up to expand and grow their business.