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Accountants urged to widen audit services

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20th Oct 2014
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Accounting firms should widen their audit services to avoid a fall in income after the turnover threshold for a compulsory audit is increased in 2015, a report says.

Currently, businesses with gross assets of less than £3.26m, or turnover less than £6.5m, are not required to get an audit.

In 2015, these thresholds are expected to increase to £5m-plus and £10m respectively when a European Union accounting directive is introduced in the UK.

Many accountants reckon the change will result in a loss of revenue.

To compensate for the expected sales dip, firms will have to identify and target new clients requiring audit for regulatory purposes (such as getting finance from banks or school academies) rather than statutory obligations, the research by accounting software company CaseWare said.

Accountants will also have to rely less on a “chargeable hours” culture, CaseWare said.

“Some of the smallest accounting firms may decide not to carry on providing audit service because of too few [audit] clients, the cost of training staff and cost of holding on to audit certificates,” said Simon Warren, managing director at CaseWare.

That will create opportunities for firms that stay in the audit market, he said.

Some businesses with a turnover below the new threshold for statutory audits may still decide to have an audit – for example, to help get bank loans or because their shareholders want an audit, Warren said.

CaseWare, which estimates that Britain’s audit market is worth £3.5bn, recommends that:

  • Accounting firms should become audit specialists – providing better advice and value for money
  • Firms should start targeting new groups of clients who require audits for non-regulatory purposes, such as for procurement or to obtain credit facilities from banks
  • The once-a-year visit and “chargeable hours” culture need to be replaced with a strategy focused on building relationships with and extending the services offered to clients whose numbers will contract
  • Audit firms need to learn how to do a good job of selling the merits of a voluntary audit to both current and future clients as an “added-value service”

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