By: AJ Chambers | 25 July, 2024

Rise in time-consuming compliance causing firms to drop audits

The increasing focus from regulators on raising standards may cause some small firms to consider dropping audits, unable to cope with the demands and time spent on paperwork imposed by regulatory requirements.


Audit has been faced with challenges over the past 12 months and has been under significant scrutiny. Increased regulatory pressures, high-profile corporate collapses, shortage of talent in audit, and a growing disconnect between small firms and audit regulators have all contributed to audits’ ongoing issues.

However, Financial Business Audits are set to change from October 2024. The changes expected to come into effect will elevate audit thresholds further. With the bar being increased, it’s estimated that 132,000 SMEs will now be exempt from mandatory audits, which may help smaller firms keep hold of their clients who do not offer, or do not wish to going forward, audit services.

Around 5,000 large companies will be reclassified as medium-sized, enabling more balanced and appropriate reporting. 13,000 medium-sized businesses could drop into the small-sized business classification. The benefits to these businesses could include audit exemption and simplified reporting. Another 113,000 small-sized businesses will fall into the micro entity classification, where even further simplified reporting options exist.


How might this impact financial management and control within SME businesses?

Although the requirement for a mandatory audit will no longer fall on many SMEs, there may be other issues that arise from not undergoing a financial audit. Audits allow businesses to have a clear view and analysis of their business’s financial standings and exemption may lead to reduced financial transparency and oversight, potentially impacting stakeholder trust and investment.

Accountancy body, the ACCA states:

“ACCA would welcome outline timetables for addressing key issues such as economic, fiscal and corporate governance reforms.”

SMEs can still choose to have an audit and may need to weigh up the benefits of reduced audit costs against the value of voluntary audits in maintaining robust financial health and investor confidence. SMEs could stay informed and consult their accountants or other advisers to make strategic decisions aligning with their long-term business objectives.


Revised thresholds

drop audit

*Note: Anything above the medium thresholds in the table above is considered a large business.

The Institute of Chartered Accountants of Scotland (ICAS):

‘We call for the Labour government to “urgently prioritise” a reform to “restore trust in business and protect people’s livelihoods”.


Auditing still an important function

The changes shouldn’t diminish the importance of auditing, and small firms should still consider its value. Auditing is relied on by shareholders and external stakeholders such as banks, so the work of an auditor is incredibly important. Audit remains the core of UK corporate governance. Many of the proposed reforms were considered necessary and innovative, before they disappeared from view. Labour may yet give them a fresh airing.

Chief executive Bruce Cartwright stressed:

“It’s too important to wait and incur even longer delays on this crucial issue of public trust”.


How AJ Chambers can assist

With over 10 years’ in audit recruitment, we are perfectly placed to help find the best talent. We are one of the UK’s leading accountancy practice recruitment consultancies, providing expert guidance in audit jobs across London, the Home Counties, East and South East.

We recruit for smaller boutiques and SMEs, through to top-level firms. Our advisers have built strong relationships with the most prominent firms and assisted many accountants with their careers. We will not only secure you the right fit, but will help you approach the new role with confidence.


If you would like support or advice about audit recruitment or guidance, please don’t hesitate to contact one of our staff. Our team has a wealth of experience in helping businesses make the best hiring decisions. Thanks to our collaborative approach, you have access to specialists across all avenues of audit and accountancy recruitment.

Audit & Accountancy recruitment

East of England: Scott Golding | scott.golding@aj-chambers.com

London: Adam Munro | adam.munro@aj-chambers.com

Northern Home Counties: Danny Brown | danny.brown@aj-chambers.com

Southern Home Counties: Jodi King | jodi.king@aj-chambers.com



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