Audit exemption thresholds to be aligned with revised small company accounting thresholds

  • Auditing Image

26 Jan, 2016

The government has announced today that the threshold for audit exemption will be aligned with the revised thresholds to determine whether a company is small which are included in ‘The Companies and Groups (Accounts and Reports) Regulations 2015’ (“the Regulations”).

The Regulations, which came into force in April 2015, implement chapters 1-9 of the EU Accounting Directive in the UK and state that a company will be small if it meets at least two of: total assets <£5.1m, turnover <£10.2m, and <50 employees at the balance sheet date.

The Department for Business, Innovation and Skills (BIS) consulted in December 2014 on implementing the EU Audit Directive (2014/56/EU) and Audit Regulation (Regulation 537/2014) in the UK.  As a result of the implementation of the Regulations in the UK and the changing of the limits for accounting, the thresholds for audit exemption would have increased automatically.  BIS sought views as to whether action should be taken to introduce separate limits for audit exemption purposes.

Following a Written Ministerial Statement today, the government has confirmed that the same size limits will be used to determine whether a company is exempt from audit (subject to assessing whether they are otherwise excluded from using the exemption).

The audit exemption changes take effect for accounting periods beginning on or after 1 January 2016.  They cannot be early adopted unlike the accounting requirements of the Regulations which may be early adopted for accounting periods beginning on or after 1 January 2015.

The Written Ministerial Statement is available on the Parliament website.

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