Home Business NewsBusiness Inflation is forcing more companies into having audits which will cost more

Inflation is forcing more companies into having audits which will cost more

by LLB Reporter
23rd May 22 11:58 am

As inflation increases, many companies which were previously small and did not require an audit will now fall into the audit regime, increasing their compliance costs significantly, say leading tax and advisory firm Blick Rothenberg.

Marc Levy, a partner at the firm said: “At the same time, changes to audit regulations over the last two years have increased the time, and costs, of an audit by around 10%.

“Furthermore, there are changes to auditing standards (around identifying and assessing the risks of material misstatements) being brought in for periods starting after 15 December 2021. These are expected to add an additional 15% to the auditor’s workload which will also increase costs.”

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Marc added: “Given these regulatory changes, the cost of an audit for a small company (excluding any inflationary increases) will soon be at least 25% higher, than when the above limits were put in place. Many smaller businesses will now face undergoing their first audit because of inflation pushing them over the threshold, resulting in an additional burden at a time when all businesses are aiming to keep their overheads under control.”

Marc said: “There have been no changes to the thresholds which require UK Companies to have an audit since 2016. Broadly, a company currently qualifies for audit exemption if it meets two of the following criteria:

  • an annual turnover of no more than £10.2 million
  • gross assets worth no more than £5.1 million
  • 50 or fewer employees on average

Marc added: “The audit thresholds were previously linked to EU regulations. Following Brexit, the power to revisit the thresholds and reduce the additional burden on smaller companies is now within the government’s control.”

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