Changes to reporting & auditing requirements

The government announced in September 2012 changes to reporting and auditing requirements for accounting periods ending on or after 1st October 2012.

These changes are part of the Government’s wider drive to reduce unnecessary burdens and make the UK one of the best places in the world to start, finance and grow a business.

If your company financial year ended on or before 30th September 2012 your company may qualify for an audit exemption if your company meets both the following:

  • Has an annual turnover of no more than £6.5 million
  • Has assets worth no more than £3.26 million

If your company financial year ended on or after 1st October 2012 your company may qualify for an audit exemption if your company meets 2 of the following:

  • Has an annual turnover of no more than £6.5 million
  • Has assets worth no more than £3.26 million
  • Has 50 or fewer employees on average
  • A public company (unless it’s dormant)
  • A subsidiary company
  • An authorised insurance company or carrying out insurance market activity
  • Involved in banking or issuing e-money
  • A Markets in Financial Instruments Directive (MiFID) investment firm or an Undertakings for Collective Investment in Transferable Securities (UCITS) management company
  • A corporate body and it shares have been traded on a regulated market in a European state

Companies that must have an audit, if at any time in the financial year they have been:

The new regulations will align mandatory audit thresholds with accounting thresholds, meaning SMEs will be able to obtain an exemption if they meet two out of three criteria relating to balance sheet total, turnover and number of employees.

The government estimates that this will allow 36,000 companies to opt out of having an audit if they so choose.

Most subsidiary companies will also be exempt from having a mandatory audit, provided that their parent company guarantees their liabilities. It is estimated that this measure will relieve a further 83,000 companies from the obligation to have a mandatory audit.

In addition, another 67,000 dormant subsidiaries will no longer need to prepare and file annual accounts, provided they receive a similar guarantee.

Business secretary Vince Cable said: “Tackling these problems will help save UK companies millions of pounds every year and free them up to expand and grow their business, which ultimately benefits the entire British economy.”