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Top 100 Accountants Braced for Audit Reform

22nd Jul 2014
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New research from CaseWare, a leading accounting and financial reporting software provider, reveals that although almost all major and mid-tier firms surveyed have been making preparations for the forthcoming audit threshold changes, 28% of accountants didn't know how the changes are going to affect their business.

Firms are preparing for the raising of the audit threshold which will mean many more smaller businesses will not need an audit with 46% of respondents to CaseWare's latest Top 100 Practices Survey saying that their firms are well prepared.  A further 48% said their practice had made a moderate amount of preparations.

Once the audit threshold is raised, which may happen in the autumn or early 2015, most accountants surveyed expected that their practice will lose significant revenue; 53% of respondents believing that their revenues will fall (compared to 37% who felt their revenues would not be affected).

The changes will affect a large number of mid-tier accountants, with 40% of respondents thinking they would affect about a quarter of their clients (compared to 8% stating that they would affect at least half of their clients and 16% thinking it would affect a negligible proportion of them).

Many accountants expect a large proportion of clients to choose not to have an annual audit when given the option, with 22% saying that only about half such clients would continue with an audit and 26% expecting only about a quarter, or fewer would continue with it.  

Client companies that chose to have an audit consider it a key factor in helping them attract investment, secure future funding and maintain transparency of their activities. 

Alarmingly, a quarter of accountants who responded did not know what proportion of their audit clients would be affected by the changes, nor how many of them are likely to stop their annual audit.

Simon Warren, Managing Director at CaseWare, commented: "The positive findings from our survey are that accountancy practices have been preparing for the impending increase in audit thresholds and the vast majority expect to take it in their stride.

"Anecdotally, we know many accountants expect that audits will often be required by an organisation's stakeholders, such as lenders and regulators, even when this will cease to be a statutory requirement. With fewer audits, firms will certainly have to maximise the efficiency of their audit process and look more closely at automation options.

"However, some of the findings caused strong grounds for concern.  Many accountants in the mid-tier sector expect that significant numbers of clients will be afected and they believe that many of them will stop having audits.  Moreover, about a quarter of respondents don't know if some of their clients will continue to undertake an audit in the future.  If those firms decide against audits, then accountants are going to need to find ways of clawing back their lost revenue from other sources and start offering alternative services to their clients."

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