Do you still need an audit? 2016 and beyond...

Changes to company and LLP law effective for periods commencing on or after 1 January 2016 allow many more businesses to claim exemption from audit. Here's a quick reminder of the headline changes.

OverviewSmall companies' (and LLPs') audit exemption criteria are principally driven by size thresholds and other qualifying criteria defined in law. For periods commencing on or after 1 January 2016, the size thresholds increase and other qualifying criteria are also tweaked.

How big is small?Size thresholds for the purposes of working out eligibility for small exemptions increase as follows:

As before, a two out of three, two-year assessment is required. The key thing to get right here is to use the new thresholds as if they always had been there.

Are you ineligible for the small regimes?There are still entities outside of the scope of small exemptions generally (e.g. public companies), and those additionally scoped out of small audit exemptions (e.g. members of non-small groups).

One point of note here is that the definition of an ineligible group for the purposes of small exemptions (generally) has changed. Whereas the presence of a 'public' company tainted the group as a whole in the past, the new rules define ineligible groups by the presence of a 'traded' company instead. So having a 'vanity PLC' in the group will no longer, on its own, prevent other group companies preparing accounts under the small regime and claiming small audit exemptions.

Do you still want an audit?

Regardless of these changes, many small entities will choose to continue to have an audit to satisfy lender or external shareholder requirements. Others may instead opt for an Assurance Review Engagement or just straight Accounts Compilation instead.

These changes add choice and flexibility for small businesses to request, and their advisors to provide, a proportionate response to the assurance needs of users of their accounts.

This blog post aims to summarise key changes to small company / LLP audit exemption conditions rather than provide a comprehensive analysis of all the rules. See the relevant audit exemption eligibility checklist and guidance notes in your Mercia Audit Exemption Manual for more details.