Many businesses are still unaware of the changes in the audit thresholds of annual end accounts that allow more companies to qualify for audit exemption.
With the end of the quarter fast approaching, and with it many fiscal year ends, now is the time to check that you are not paying for unnecessary audit services.
The Government changed the rules for audit exemption thresholds for limited companies and LLPs applying to companies with financial years ending on or after 1st October 2012.
The old rules:
Previously, to be exempt from audit a ‘small’ company had to meet the following criteria:
Annual turnover not more than £6.5 million
Balance sheet total not more than £3.26 million
The new rules:
Any company that qualifies as a ‘small’ company in accordance with Companies Act 2006 will be exempt from audit provided they satisfy 2 of the following 3 criteria:
Annual turnover not more than £6.5 million
Balance sheet total not more than £3.26 million
Average number of employees not more than 50
What does it all mean?
Companies that would previously not have qualified for audit exemption may now be eligible. For example, a company with an annual turnover of £6 million, but a balance sheet of £4 million, would not previously have qualified. If, however, that company has less than 50 employees it will now qualify for audit exemption.
This in turn means that many companies will be able to make significant savings on their year end accounting costs. Not only will they qualify for audit exemption, saving them the cost of an audit, they will also be able to take advantage of more competitive pricing available from other accountancy firms who do not offer an audit service.
With the end of the quarter approaching, and with it the end of the financial year for many businesses, companies must ensure that they are aware of these changes and act accordingly to save any unnecessary financial outlay.
Businesses must, however, ensure that there are no other factors which might require them to have an audit. For example, if a company has bank borrowings there may be a requirement in the loan documentation to have an annual audit carried out.
Even basic corporation tax liabilities can cause an unexpected tax bill at the end of the financial year, so using a corporation tax calculator ensures you can predict these financial risks to some degree.
