Business welcomes plan to relax audit requirements

Ministers have unveiled plans to relax the requirements on small companies and subsidiaries to conduct a financial audit.

The Department for Business, Innovation and Skills has launched a consultation proposing that companies decide for themselves whether or not to have an audit, in an effort to save more than 100,000 businesses at least £600m a year.

Business groups welcomed the move, although skepticism was still evident concerning the Government’s drive to cut red tape.

Lucy Armstrong, chair of the CBI’s SME council, said it was ‘right to put this decision in the hands of the businesses themselves’.

Adam Marshall of the British Chambers of Commerce told the Financial Times: ‘If they can deliver steps like this on a regular basis, business will start to gain confidence in the deregulatory push. But it really is a question of delivering a change like this week in, week out.’

An average audit for a small company costs £9,500. Currently, European Union rules mean that to classify as ‘small’ for accounting purposes, a company must comply with two out of three criteria: having no more than 50 employees, a balance sheet below £3.26m and turnover below £6.5m. However, to obtain an audit exemption in the UK, small companies must fulfill both the balance sheet and turnover criteria.

Under the proposals, SMEs in the UK would be eligible for audit exemption by meeting any two of the three criteria.