Company Audit Thresholds

A compulsory, external, audit is one of the fundamental ways in which investors (owners) can evaluate the stewardship of a company by its management. It forms the basis of financial performance assessment as well as contributing to the veracity of tax returns and compliance with a host of governance issues.

In cases of small firms, where the managers and the owners may well be the same person the value of an audit is less clear and the not inconsiderable costs start to look excessive. Hence successive government shave invoked lesser requirements for small and medium sized companies as part of broader de-regulation aims.

De-regulation here comprises definitions of who is eligible for special treatment and, if eligible, what lessening of the normal standards are reasonable. The Business, Innovation and Skills Department has recently consulted on fresh ‘derogations’ (there is a new EU accounting Directive which needs to be implemented anyway) and further changes are expected.