Insight Associates provide outsourced accounting and Finance Director services to ambitious and growing businesses. We work as your only resource or with existing staff to give you complete financial support including monthly management accounts, high level financial advice, robust controls and financial systems, funding and business planning, payroll & compliance, VAT returns and statutory compliance.

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Thursday, March 10, 2011

Changes in the audit thresholds for UK companies

I do wonder if Vince Cable has lost his mind?

It has been announced that the Government intends to increase further the audit exemption threshold from 2012, from its present £6.5m turnover to the EC maximum of £8.6m (€10m). In addition it intends to seek exemptions (through Europe) for businesses turning over less than £1.7m (€2m) not to have to file accounts at Companies House!

This is all in the name of reducing red tape! Sorry?? How does that work exactly?

It staggers me that Mr Cable does not seem to understand that any well run business will already be producing accounts for management purposes as a tool for good decision making. That is without considering the Directors legal obligations to understand the financial position of the business at any time, and the need for accounts for tax purposes etc. Given this how does not filing accounts at Companies House save around £400m a year??

Added to this the pledge to remove the need for independently audited accounts for thousands of small businesses is endangering the economy rather than improving it. Saying “it’s important that we free small firms up so they grow and drive the economy” is short sighted at best and downright irresponsible at worst.

Whilst there are arguments that privately owned businesses, run by the owners, have a limited need for independent examination, this is only part of the story. Surely one of the prices paid for limited liability is the need for good stewardship. If a businesses owners are going to benefit from protection from their companys creditors then they should ensure that those same creditors can make informed decisions about the creditworthiness of the company they are lending their money to! A lack of available accounts, and any independent examination will surely have a detrimental impact on the granting of credit and therefore the working capital available to businesses.

The whole decision defies logic! It does nether save money nor improve the growth prospects of the economy!

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