UK businesses give a cautious thumbs up to audit threshold change

RSM survey reveals three in five businesses believe financial reporting quality will decline as result

The Department for Business (BIS) has confirmed that audit thresholds are to increase in line with accounting thresholds, meaning that many more UK businesses will now be exempt from having an audit.

The move comes as a survey carried out by RSM has revealed mixed results: whereas 64 per cent of decision makers within UK private limited companies agreed with the move, 60 per cent of these respondents believed there would be a decline in the quality of financial reporting as a result of the rise in audit thresholds, with nearly half (46 per cent) saying they wouldn't want to be released from the necessity of having an audit and filing an audit report.

The decision follows the announcement last year that the thresholds determining the size of a small company would increase from a turnover of £6.5m, to £10.2m and gross assets from £3.26, to £5.1m.

Jonathan Ericson, RSM UK’s Head of Audit, said,

‘I expect that this announcement will be largely welcomed although businesses will need to take care that they are still meeting their regulatory responsibilities with regard to complying with the Companies Act. The government continues to do a good job by cutting the red tape for small businesses and, in turn, providing them with the tools they need to help them flourish and innovate. Going forward, the government needs to ensure this takes place in a regulatory environment that looks after all stakeholders’ interests.’