Potential changes lie ahead that could reduce reporting requirements for thousands of companies.
The Government has proposed to increase audit thresholds, which determine whether a company requires a statutory audit, by 50% with the measures set to be effective for financial years beginning on or after 1 October 2024. As a result, for an estimated 132,000 businesses their audit will no longer be compulsory.
Proposed audit threshold changes
- Micro entity thresholds will move from not more than £632,000 turnover to not more than £1m.
- For small companies, the threshold will increase to not more than £15m turnover, from £10.2m.
- The upper medium threshold will move to not more than £54m.
- Everything above that would classify as a large company.
- The balance sheet total thresholds would increase to not more than £500,000, £7.5m, £27m and anything above £27m, respectively.
While the benefits this will bring include reduced costs and removes a regulatory burden for many, other valuable benefits an audit provides, will also be lost. Having an audit is not just a box-ticking process and can add value in many ways.
How does an audit benefit your business?
An audit not only reviews a company’s financial records and ensures it complies with regulatory requirements.
It can identify opportunities for growth, protect jobs, and improve internal control processes as well as improve a business’s reputation, protect the value of the business and make it easier for companies to access financing and investment.
If, as a result of the proposed changes, your company would no longer require a statutory audit, it is worth considering the wider impact this will have on your business, rather than simply looking at the cost savings you will make.
Impact on growing businesses
Where a business is quickly expanding and may initially be removed from the requirement to be audited but then in a few years could breach the new threshold, extra consideration will be necessary.
Fast-growing businesses in particular will need to focus on ensuring that their internal control environment is properly structured to allow them to deal with growth. They may
require additional access to funding and may realise a greater benefit of an audit than more mature businesses.
With a General Election announced for July 4, there may be further delays to these proposed changes and the continued uncertainty doesn’t help businesses plan for any impact, but it is something that all companies need be aware of.
If your company is about to go over the audit threshold due to success or inflation, or you would like to know more about what an audit is and does, and how it can add value please get in touch.
Call 0808 144 5575 or email help@armstrongwatson.co.uk
