New audit exemption rules for small companies and for subsidiaries
The government has recently announced changes to company law that allow many companies and limited liability partnerships more choice in deciding whether to have a statutory audit. The changes apply to financial years ending on or after 1 October 2012.
Who is affected?
Broadly, there are two main types of company and limited liability partnership, collectively referred to as ‘companies’ below, affected by the audit exemption changes:
- companies and groups that currently qualify as ‘small’ under company law but that are not exempt from audit because of their turnover or balance sheet total; and
- subsidiary companies that currently require an audit.
What has changed?
The changes introduced:
- align audit thresholds with small company thresholds, meaning that virtually all companies and groups that qualify as small can choose whether they wish to have an audit or not; and
- allow qualifying parent companies and their subsidiaries to decide whether or not to have a subsidiary audit, regardless of its size. Instead, parent companies can opt to provide a statutory guarantee over the subsidiary’s liabilities. Dormant subsidiaries will also be exempt from the requirement to prepare and file accounts, subject to the provision of a similar guarantee.
How can we help?
These changes remove the legal requirement to have a statutory audit from many more companies and therefore provide us with an opportunity to provide a more flexible service for you.
There are, as always, a number of legislative details and other factors to consider before a decision can be made to dispense with an audit. If you would like to discuss the new options available in relation to your business in more detail please contact us.