AS expected, the audit exemption threshold has increased despite some fairly strong opinions against the rise from the accounting profession and financiers alike. For owner-managed businesses in particular, this increase raises the question as to whether an audit is really necessary. And the answer is that it depends.
Audit is still the right answer for many businesses seeking a fairly high level of assurance around their financials.
AS expected, the audit exemption threshold has increased despite some fairly strong opinions against the rise from the accounting profession and financiers alike. For owner-managed businesses in particular, this increase raises the question as to whether an audit is really necessary. And the answer is that it depends.
Audit is still the right answer for many businesses seeking a fairly high level of assurance around their financials. This is supported by a number of surveys, undertaken since the announced rise, with evidence suggesting nearly half of those business who will be affected by the changes stating they will still choose to have an audit.
The benefits of an audit are well publicised including increasing shareholder investor confidence, ensuring sound financial reporting, an increase in financial creditability and an additional safeguard against fraud or error.
However, for some businesses there are real alternatives which may better suit their needs. The term assurance has long been synonymous with an audit. The truth is that assurance can come in a number of forms.
The key for the profession is to take the time to really understand their clients. What drives their business, what concerns do they have, and where would they appreciate and value a second opinion? If, for example, they would benefit from a general overview of the company’s performance and analysis around key movements and variables, than an assurance review may best suit. Effectively, a scaled down version of statutory audit.
Alternatively, they may have been through a transitional stage in terms of systems or operations. In this instance, some pre-agreed procedures may be better. This allows the client to essentially create a bespoke engagement to focus on the areas which are most important to them.
What is clear, however, is that the change to the threshold doesn’t signal the decline of audit but rather its evolution with more options than ever for business owners to decide what level of assurance they are seeking and the areas of focus they would like it on.
If you’re not sure which direction you should be taking, feel free to give us a call to talk through the right solution for your business.
Contact Gary Woodhall, Regional Head of Audit, Haines Watts Northampton on 01604 746760 or email
