Raising the threshold for audit exemption for small companies: Some implications for other users of audit services
| Date | 01 April 2000 |
| Pages | 300-308 |
| Published date | 01 April 2000 |
| DOI | https://doi.org/10.1108/eb025051 |
| Author | Stella Fearnley,Tony Hines,Karen McBride,Richard Brandt |
| Subject Matter | Accounting & finance |
Raising the threshold for audit exemption for
small companies: Some implications for
other users of audit services
Stella Fearnley,* Tony Hines, Karen McBride and Richard Brandt
Received: 4th September, 2000
*Department of Accounting and Management Science, University of Portsmouth, Locksway Road,
Portsmouth, Hants, P04 8JF; tel: +44 (0)23 9284 8484; fax: +44 (0)23 9284 4037;
e-mail: stella.fearnley@port.ac.uk
Journal of Financial Regulation and Compliance Volume 8 Number 4
Stella Fearnley BA FCA FRSA is a Reader
In Accounting at Portsmouth Business
School. She is deputy chair of the ICAEW's
Centre for Business Performance.
Tony Hines MSC FCA is a Principal Lec-
turer in Accounting at Portsmouth Busi-
ness School.
Karen McBride BA MSc ACCA is a Senior
Lecturer in Accounting at Portsmouth Busi-
ness School.
Richard Brandt MA FCA FRSA is a
Research Fellow at Portsmouth Business
School and was formerly head of audit at
Grant Thornton.
ABSTRACT
As part of a deregulation initiative for small
businesses, the audit exemption limit was
raised
to £1m by the Audit Exemption (Amendment)
Regulations 2000 in May 2000. This paper
examines the possible consequences of this
change on the supply of
registered
auditors' ser-
vices and the subsequent impact this may have
on a range of
business
entities, other than small
private companies, which use
registered
auditors
for
various
purposes.
In May 2000, a Statutory Instrument1
exempted eligible small private companies
with turnovers of no more than £lm
from compulsory audit, subject to certain
safeguards for minority shareholders. This
followed a ministerial statement which also
stated that the government's long-term
plan was to raise the exemption limit to
£4.8m, the maximum permitted in the
European Community (EC).2
In this paper the authors identify some
of the possible consequences of this
change on the supply of registered audi-
tors and the subsequent impact this may
have on a range of business entities,
other than the traditional small private
company, which use the services of regis-
tered auditors for various certification
purposes.
This paper has four main sections. First,
the background and history of the recent
change is explained. Secondly, the principal
entities (other than companies with a turn-
over of more than £lm) which use the
services of registered auditors are identified
and their needs discussed. Thirdly, the
potential impact of the change on the
future supply of registered auditors and the
implications for other users of the services
of registered auditors are considered. In
conclusion, the authors suggest possible
solutions to the issues which have been
raised.
Journal of Financial Regulation
and Compliance, Vol. 8, No. 4.
2000.
pp. 300-308
© Henry Stewart Publications.
1358-1988
Page 300
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