The Government, in an attempt to reduce the regulatory burden of reporting, has changed the thresholds for classifying business sizes. This means that thousands of organisations will now be exempt from mandatory audits.
However, there are numerous benefits to being audited (or undergoing a slightly less comprehensive level of assurance), so if you find your business is now exempt, don’t automatically rule out future scrutiny.
The new audit thresholds for business size are:
Anything over this size is classified as a large company.
Currently, the employee numbers for micro, small and medium enterprises will stay the same at 10, 50 and 250 respectively, but it is likely that the threshold of medium-sized enterprise employees will increase from 250 to 500 employees.
Clearly, if your business size falls above the new thresholds, then you will still require a mandatory audit, and these new rules are likely to be introduced for companies whose financial years begin on or after 1 October 2024.
However, business size isn’t the only factor that can trigger an audit. For example, a shareholder owning of at least 10% can request an audit is carried out. Also, it’s important to note that there have been no changes made to audit threshold for charities.
Even if you no longer need your business audited, don’t immediately rule it out. There are many practical benefits to having an audit, including having more accurate and reliable financial information, making sure you are compliant, and detecting fraud or errors.
But there are also many positive, perhaps hidden, benefits to being audited or having an assurance review, which will reap rewards for your business.
These include:
1, Building trust with stakeholders
Audited financial statements give investors confidence in the company’s operations and future profitability. An audit can also improve the company’s image, showing that it is well-managed, compliant, and transparent.
2, Aiding decision-making
With accurate financial statements and a clear view of the company’s financial position, business owners and directors can make better-informed decisions regarding budgeting, investments, and growth strategies.
It also allows the management team to compare their financial performance with industry peers or previous years, providing insights for strategic adjustments.
3, Added value for business
An audit or assurance review will recommend system enhancements, review internal controls, and apply a risk-based approach, all of which can significantly strengthen the business, giving it a platform for growth.
There are clear advantages to being audited, or you may opt for an alternative, less rigorous level of assurance. Remember, the benefits lie not just in enabling you to keep abreast of accurate reporting and compliance, but in developing and growing a strong business.
To talk to our specialist audit team at Optimum, please get in touch.
