By John Davies, head of technical, ACCA
An interestingly headed press release from the UK's Department for Business, Innovation and Skills (BIS) landed in inboxes late Friday afternoon: 'Government action to save small firms £40m – no small firm will have to have independently audited accounts any longer'. As is the case with any press release though, the headline is slightly more dramatic than the actual detail.
For a start, the sweeping reforms proposed for micros and the exemption from audit for medium-sized companies are both dependent on EU agreement, which won't necessarily be easy to come by.
A motion passed by the European parliament to allow member states to exempt micro companies from the current EU accounting rules shows no sign of becoming law any time soon given the strong opposition being shown by a number of member states. BIS' proposal to exempt medium-sized companies from audit has yet to be seriously debated at the European level.
Besides, this isn't new news: we already knew BIS' stance on these things already from its submission to the EU's Green Paper on audit (BIS called for the audit exemption threshold to be raised to £25m).
What's most concerning about the release though is the renewed reference to accounts and audit as ‘red tape'. They just aren't. Accounts and audit provide credibility and stability to any business; they should not be dismissed as being a mere compliance burden.
Update: Gavin Hinks at Accountancy Age makes some fair points about BIS' announcement on the Age's Insider blog.