Reporting and auditing

There are a number of key proposals within this area.

Raising the definition criteria of a small company to the maximum permitted under EU regulation.

	Current small company limits	Proposed small company limits
Turnover not more than	£2.8m	£4.8m
Balance sheet total not more than	£1.4m	£2.4m
Number of employees not more than	50	50

Generally a small company must satisfy two out of the three criteria. This is subject to other specific rules.

Comment

This is an important change if your company is currently a ‘medium-sized’ company as this may mean that it will meet the definition of a small company. Qualifying as small entitles a company to produce simplified accounts with fewer disclosures.

Reducing the time allowed to file accounts at Companies House.

	Current filing deadline	Proposed filing deadline
	months from the end of the accounting period	months from the end of the accounting period
Private limited company (Ltd)	10	7
Public limited company (Plc)	7	6

Comment

This is another important change as the proposal reduces the amount of time available to prepare your accounts and, if necessary, complete the audit. Once the date for the proposed change is announced we will need to discuss possible amendments to our combined year end timetable. Remember there are automatic penalties that will be imposed if your company’s accounts are filed late. These range from £100 to £1,000 for private companies and from £500 to £5,000 for public companies, dependant upon how late the accounts are filed.

The option for small and medium-sized companies to file abbreviated accounts at Companies House will be abolished.

Comment

The government considers it important that company accounts should be generally available. Therefore, the option to file only very limited company accounts information will be removed under the new proposals.

There are no immediate proposals to increase the audit threshold. Instead, the government will assess the impact that raising the audit threshold to its current level of £1m turnover has had.

Comment

The audit threshold was raised to £1m turnover in July 2000. In order to qualify as audit-exempt, a company must also have total assets (before any reductions for liabilities) not exceeding £1.4m.

The Company Law Review commented that the government should decide whether to require an independent professional review for companies where turnover fell between £1m and £4.8m. The government has rejected this proposal.

As to whether small companies under the new definition will become audit-exempt - this remains an area where we will have to wait and see for a while longer.

Replacement of the current directors’ report, which for small companies will mean a short, simple, supplementary statement.