
Recent changes introduced by the previous Government have adjusted the thresholds for company size classification, potentially exempting around 132,000 businesses from mandatory audits.
These updated thresholds will apply to financial years starting on or after 1 October 2024.
As a result, many small and medium-sized enterprises (SMEs) may see a considerable change in their audit requirements.
Impact on your business
With the revised audit thresholds, numerous SMEs may no longer be required by law to undergo statutory audits.
This change could lead to substantial cost savings, as the expense of conducting an audit is often a considerable burden for smaller businesses.
However, while these savings are appealing, there are downsides to consider, such as reduced financial transparency and a possible decline in investor confidence.
Audits play a vital role in providing stakeholders with a clear and trustworthy picture of a company’s financial health.
Details of the new thresholds
The new thresholds for audit exemption are as follows:
- Micro businesses: The turnover limit has increased to £1 million from £632,000, and the gross asset limit has risen to £500,000 from £316,000.
- Small businesses: The turnover cap is now £15 million, up from £10.2 million, with the gross asset limit raised to £7.5 million from £5.1 million.
- Medium businesses: The turnover limit has been elevated to £54 million from £36 million, with a new gross asset threshold of £27 million, up from £18 million.
Businesses exceeding these figures will be classified as large companies, still subject to mandatory audits.
The thresholds for employee numbers remain at 10, 50, and 250 for micro, small, and medium enterprises, respectively.
However, future increases to these employee thresholds may be considered.
What to plan for
If your business falls within the new thresholds and is exempt from mandatory audits, it is still advised to maintain strong financial management practices.
Good governance and high standards of reporting will help with managing risks and ensuring that your business remains financially healthy and attractive to investors, even without a statutory audit.
For businesses considering voluntary audits or those navigating these regulatory changes, seeking professional advice can be invaluable.
A voluntary audit, while not required, can still provide benefits, including enhanced financial insights and greater credibility with stakeholders.