Partner Marc Levy comments: “At the same time, changes to audit regulations over the last two years have increased the time, and costs, of an audit by around 10%. Furthermore, there are changes to auditing standards (around identifying and assessing the risks of material misstatements) being brought in for periods starting after 15 December 2021. These are expected to add an additional 15% to the auditor’s workload which will also increase costs.
“Given these regulatory changes, the cost of an audit for a small company (excluding any inflationary increases) will soon be at least 25% higher than when the above limits were put in place. Many smaller businesses will now face undergoing their first audit because of inflation pushing them over the threshold, resulting in an additional burden at a time when all businesses are aiming to keep their overheads under control.
“There have been no changes to the thresholds which require UK Companies to have an audit since 2016. Broadly, a company currently qualifies for audit exemption if it meets two of the following criteria:
- an annual turnover of no more than £10.2 million
- gross assets worth no more than £5.1 million
- 50 or fewer employees on average
“The audit thresholds were previously linked to EU regulations. Following Brexit, the power to revisit the thresholds and reduce the additional burden on smaller companies is now within the Government’s control.
“All of the above concerns are before the future impact of the new audit regulator that was included in the Queen’s speech, which will only lead to increased levels of scrutiny.”
If you would like to discuss any of the above, please get in touch with Marc Levy using the form below.