Businesses fail to use audit exemption

Only a third of small companies have taken advantage of the lower audit exemption thresholds introduced in 2015, citing concerns about bank covenants and loans, as a key factor in retaining their audits despite potential cost savings.

The first report into use of the audit exemption, released by the Department for Business, Energy and Industrial Strategy (BEIS), polled 400 small and medium-sized businesses (SMEs) to analyse the take-up of new audit exemption reforms in 2015. Based on extrapolated numbers, BEIS calculated an overall £4.6bn saving on the basis of reduced audit fees and less time spent on paperwork.

But takeup of the new audit threshold exemption has been lower than expected with less than a third of eligible SMEs using the exemptions. Original government estimates expected that up to 80% of companies would take up the exemption and drop their annual audits. BEIS argued that the reason for the lower than expected take-up was ‘inertia and the fact that some companies have always undergone audits’.

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