More Financial Control Needed With Audit Reforms

The role of the management accountant has become even more important this week, as the Government introduced changes to reporting and auditing requirements, allowing more firms to qualify for audit exemptions.

Previously small firms had to have both a gross assets value below £3.26m and less than £6.5m turnover to qualify for audit exemption, but now businesses qualify for the exemption if they meet two out of three criteria relating to balance sheet total, turnover and employing no more than 50 staff.

Subsidiary companies will also benefit from an exemption from mandatory audit, as long as their parent company guarantees their liabilities. Dormant subsidiaries will no longer need to prepare and file annual accounts, provided they receive a similar guarantee.

While greater freedom was also provided for companies to determine the most appropriate set of accounting rules for them. The Government estimated its “more proportionate” approach to accounting rules would save firms up to £390m per year.

However, the new freedom will make internal financial and strategic management reporting even more crucial, as a firm that decides to opt out of audit will need to adhere even more closely to the business plan, and management will need even more assurance that its decision-making processes are correct.

As a strategic partner and provider of decision based financial and operational information, management accountants will have even more responsibility for managing the business team.

With more small firms than ever finding it difficult to obtain external finance, the management accountant will need to be able to present financial reports that engender confidence in lenders.

Posted in Blog, Business Technology.