Audit rules are changing – Get ready
In a bid to ease the regulatory burden on businesses, new thresholds for classifying company sizes have been announced.
This change, introduced by the previous Government, could allow around 132,000 businesses to skip mandatory audits.
Under the current plans, which may be subject to change, companies will be able to benefit from the threshold changes for financial years commencing on or after 1 October 2024.
How will this affect my business?
By increasing the audit thresholds, many SMEs will no longer require statutory audits.
With this change comes new challenges. Many stakeholders and investors rely on audits to provide them with accurate insights into the business’s financial health, so, the exemption could lead to reduced financial transparency and oversight.
It is essential for SMEs to carefully consider whether the savings from reduced audit costs outweigh the benefits of voluntary audits in ensuring strong financial health and maintaining investor confidence.
Although some companies may no longer be mandated to conduct statutory audits, they will still be under regulatory scrutiny.
This change promotes a risk-based approach to financial management, internal controls, and reporting, ensuring transparency and accountability without the need for a formal audit.
The new audit thresholds
For micro businesses, the turnover threshold has increased from £632,000 to £1 million and a gross asset threshold of £500,000 increased from £316,000.
For small businesses, the turnover threshold has increased from £10.2 million to £15 million and a gross asset threshold of £7.5 million increased from £5.1 million.
For medium businesses, the turnover threshold has increased from £36 million to £54 million and a gross asset threshold of £27 million increased from £18 million.
Any figure exceeding this would categorise the entity as a large company.
Currently, the employee numbers for micro, small and medium enterprises will stay the same at 10, 50 and 250 respectively, however, further consultation is expected on the threshold of medium-sized enterprise employees to increase it from 250 to 500 employees.
Additionally, consideration is being given to eliminating the requirement for medium-sized enterprises to prepare a strategic report.
To be eligible for the exemptions you need to meet two out of the three threshold criteria.
How should I prepare?
While many businesses will feel relief from these changes, they need to stay on top of their financial management and uphold strong governance and reporting standards.
By managing risks well and sticking to best practices, businesses can adapt to these changes smoothly and contribute to a healthy, resilient economy.
