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UK Accounting Firms Expect Significant Falls in Fee Income from SME Audits if Audit Exemption Limits are Increased

16th Oct 2014
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Wolters Kluwer provides software to tax and accounting professionals.

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October 7, 2014 — A quarter of the UK accountancy firms surveyed by Wolters Kluwer’s UK tax and accounting software business believe they will lose 25% of the fee income they earn from small company audits if the UK  adopts the maximum audit exemption limits permissible under EU regulations.

If the result of the proposed government consultation, which will happen next year, is to increase the current levels of audit exemption for small companies to the maximum allowed of £10.2M for turnover and £5.2M for the balance sheet, the survey shows that 26% of the practices that conduct 10 or fewer audits would consider giving up their audit registration  as a result of the potential loss of audit fees from their clients.

The survey by Wolters Kluwer, developer of the market-leading CCH Audit Automation software, which covered almost 100 accountancy practices, also found that 22% of firms expect to see an increase in their non-audit fee income. At the same time, nearly 40% of practices are considering providing additional services to replace anticipated lost income, with 70% of them considering offering Assurance Review Engagement services as an alternative.

A small percentage of firms (7%) believe they will see a 75% drop in their audit fee income.

Paul Brace, Wolters Kluwer’s UK business development manager for audit and accounts software, says: “As we would expect, practices with a smaller number of audits - up to 25 - feel more vulnerable than those with a larger audit portfolio.

“However, some of the survey respondents believe their clients will continue with statutory audits even if the threshold change removes the requirement. Other firms believe that the majority of their clients would take advantage of the increase to reduce the legislative burden of an audit.”

The Wolters Kluwer online survey was conducted in September 2014.  White paper on the Wolters Kluwer survey findings are downloadable from here

About Wolters Kluwer

Wolters Kluwer (www.wolterskluwer.com) is a market-leading global information services company. Professionals in the areas of legal, business, tax, accounting, finance, audit, risk, compliance and healthcare rely on Wolters Kluwer's leading information-enabled tools and software solutions to manage their business efficiently, deliver results to their clients and succeed in an ever more dynamic world. Wolters Kluwer had 2013 annual revenues of €3.6 billion, employs approximately 19,000 people worldwide, and maintains operations in over 40 countries across Europe, North America, Asia Pacific, and Latin America. Wolters Kluwer is headquartered in Alphen aan den Rijn, the Netherlands. Its shares are quoted on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt programme. The ADRs are traded on the over-the-counter market in the US (WTKWY).

Wolters Kluwer Tax & Accounting is the leading global provider of tax, accountancy and audit information, software and services under the CCH brand. It has served tax, accountancy and business professionals since 1913. In the UK CCH (www.cch.co.uk) provides software, online information, books, magazines, professional development and fee protection.

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