James Todd & Co, a Hampshire and West Sussex-based business accountancy and audit firm, has noted considerable upticks in demand for professional, independent audit services despite forthcoming changes to company size thresholds that will exempt a proportion of incorporated businesses from audit.
The practice, which has over 30 years of experience, clarifies that many companies, particularly larger enterprises, are organising audits to comply with shareholder and stakeholder requirements alongside an increasing need for regulatory audits in specific industries.
Changes to the UK Audit Landscape and Company Audit Thresholds
Notwithstanding any reforms following the July General Election, company thresholds are due to change from 1st October 2024, which will affect the number of businesses required to submit an independent audit report alongside their annual accounts. Statutory audits must be completed by a suitably accredited audit professional.
The proposed new measures will mean that:
- Micro-entity exemptions will apply to companies with a turnover not exceeding £1 million, compared to a current threshold of £632,000.
- Small businesses exempt from audit will be categorised as those with a turnover of up to £15 million, increased from £7.5 million.
- Medium companies, which require audit, will be considered organisations with a turnover not exceeding £54 million, up from the existing threshold of £18 million.
- Large companies, which also require audit, will include those with turnovers above £54 million, balance sheet values of £27 million or more and 251 or more employees.
While the impacts will mean 13,000 medium-sized companies will be re-categorised as small, entitling them to claim potential audit exemption, this doesn’t counteract the volume of businesses that have grown in turnover, balance sheet values and workforces over recent years.
Data collated in October 2023 showed that there were 5.6 million private businesses in the UK—a rise of 54,000 from the year before. Comparing those figures to the 5.25 million registered companies ten years ago illustrates that, even if 13,000 companies will no longer need to complete an audit in their next financial year, this is a fraction of the number of trading businesses.
The adjustments to company threshold sizes, while exempting a small proportion from statutory audit, are primarily designed to simplify reporting procedures and remove legislative reporting requirements from smaller firms. For most of the 36,000+ medium-size businesses and just under 8,000 large companies currently registered in the UK, their audit obligations will remain unchanged.
Growing Demand for Internal and Regulatory Audit Processes
Audit and Assurance Director, Oliver Read FCCA ACCA, of James Todd & Co says, ‘Part of the drive to expand our audit services is down to the general long-term growth in British businesses. In most cases, companies with professional, ongoing support and financial planning assistance grow steadily year on year, which naturally means a business that was ‘small’ a decade ago is far more likely to be at a size now where an audit becomes compulsory.
However, another big shift we've seen in recent years is demand for internal and regulatory audits. These audits might be conducted for various reasons, such as to examine and report on specific aspects of a company’s operations or performance or as a compulsory requirement for companies trading in regulation-heavy sectors.
Interest in carbon neutrality and ESG reporting (environmental, social, and governance) also means that stakeholders and partners may require an independent audit report to analyse non-financial elements or that companies need to produce audits to verify the authenticity and accuracy of their reports.
Other changes, such as reforms to import controls, mean businesses recognise the value and importance of internal audits, not solely to provide shareholders with the level of oversight they command but to ensure a company has the absolute assurance that its accounting treatments and internal controls are dependable and robust.’
Rules and Regulations Around Audit Services
Any formal audit process must be conducted by an accredited, qualified auditor with sufficient expertise to perform a thorough assessment of the company's accounts or other reporting, and deliver an audit outcome outlining their findings and opinion on the accuracy of the reports in question.
In the UK, auditors should have current membership with an appropriate chartered accountancy body, such as the Institute of Chartered Accountants in England and Wales (ICAEW) or the Association of Chartered Certified Accountants (ACCA).
Companies looking to arrange an audit of any scope should ensure their auditor or audit team is properly qualified, with sector-specific knowledge where necessary and an up-to-date understanding of professional standards and regulatory requirements where applicable.
Read more about James Todd & Co - Leading West Sussex Chartered Accountants, James Todd & Co, Open New Offices, Expanding Services and Expertise
About James Todd & Co
James Todd & Co. have been providing accounting services for more than 30 years across Chichester, Fareham, and Lavant for Sussex and Hampshire businesses. Their clients trust them to provide bookkeeping, financial auditing and compliance, management accounting and financial advisory services.
Media Contact:
Angie Daniels
James Todd & Co.
Drayton House,
Drayton, Chichester,
West Sussex
www.jamestoddandco.co.uk
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Source Company: https://www.jamestoddandco.co.uk/
Published by: Steve OBrien