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Audit exempt - but should you still have an audit ?

With the audit turnover threshold at £5.6M many companies no longer need a statutory audit.

However, many still choose to so as they see the annual scrutiny by qualified accountants as a good housekeeping measure which also provides them with financial statements that are perceived even more reliable by the shareholders, banks and other lenders and all other interested parties.

You, the “owners” of Owner Managed Businesses (OMB's), often see an audit as an evasive, costly and time consuming process which adds little to day to day running of the business, however you want more than the “box standard” accounts preparation approach. Many OMB’s qualifying for audit exemption, simply have their accounts prepared, from the books and records, without any further work being undertaken by an accountant, who may themselves not even be qualified. In my experience, such accounts are often unreliable and miss required disclosures.

So what should you do if you want more than accounts preparation but less than a full blown audit ? Well firstly if you appoint a Registered Auditor to do your accounts preparation then they are bound by certain ethical guidelines and will undertake the work in accordance with guidance published by their professional body. However, if this work solely is undertaken, they will still not issue an opinion or conclusion on the accounts.

An alternative “half way house” is the Assurance Service that ICAEW members can provide. Such a service will include some independent work on the accounts to improve their credibility. Typically such work will include more “comparison” work and will involve more detailed discussions with the directors. Any necessary further work would be tailored to the company itself. The Chartered Accountants’ Assurance Report is worded to express a conclusion of the accounts, based on the work procedures.

Many Chartered Accountancy practises feel that in order to achieve their ethical standards that an Assurance Report is the minimum report that should be given and, in any case, they already complete the work that is required to issue one anyway when preparing any set of statutory accounts.

Is this a way for the qualified accountants to differentiate themselves from the unqualified accountants ?





 

 

Date: 18th April, 2007
Author: Gary Farnes

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