VERNMENT plan to slash red tape for small businesses was welcomed by auditors when it was announced yesterday by the Department for Business, Innovation and Skills (BIS).
Over 100,000 businesses could be released from the requirement to undergo a statutory audit, potentially saving small firms millions of pounds.
The rules will make firms eligible for an audit exemption if they pass two criteria relating to their balance sheet, turnover, and number of employees – previously they had to pass three.
Even more important may be giving an exemption to dormant subsidiaries, and subsidiaries whose parent guarantees their liabilities.
Despite the potential for losing business, the response from auditors was positive. “This is an innovative and welcome initiative offering flexibility to companies,” said Simon Letts, head of audit quality at Deloitte.
“While an audit is a valuable service to provide assurance to shareholders and directors...these benefits may be considerably lower for wholly owned subsidiaries,” he added. He went on to caution that directors would need to carefully balance their assurance needs with the costs of an audit.