Increasing the audit exemption threshold across the EU
Date
-Round Table discusses "Simplification versus good corporate governance and transparency?"
This challenging question was the title of an event recently organised in Brussels by ACCA (the Association of Chartered Accountants) about the role of audit and how it can be enhanced to better meet stakeholders' needs. It is part of a series of roundtables organised by the global accountancy body throughout Europe and beyond, in order to produce a comprehensive study on the future of audit. The findings of this study time in with the preparation of the upcoming overhaul of the 4th and 7th Accounting Directives - to be unveiled by the European Commission end 2010-early 2011 - which should encompass a part on audit exemption thresholds; and also of two forthcoming EC green papers respectively on corporate governance (to be published end of May) and on the role of audit due in September.
At the roundtable, around 30 informed stakeholders - including the European Commission, academics, as well as financial services experts and practitioners - sought to answer a series of questions about the potential consequences of increasing the audit exemption thresholds in the EU.
They discussed whether the audit exemption threshold across the EU was at the right level, what evidence was used in setting the audit exemption threshold and whether the criteria which are taken into account - such as turnover figures, balance sheet totals and number of employees - are the right factors. They also examined the regulatory burden of an audit, especially on SMEs, versus the value of an audit, as well as the role of audit to fight against bribery, corruption and money laundering.
Neil Stevenson, ACCA's Executive Director-Brand, said: "This debate clearly highlighted that the value of audit needs to be considered in the context of a wider societal approach to checks and balances which provide assurance to all stakeholders. It is clear that audit can drive confidence in markets."
Surprisingly, the discussions revealed that the vast majority of European companies (around 98. 7%) are today exempted from statutory audit, covering almost half of all employees in Europe, and that approximately 1.4 million audits are performed each year while the EU mandates only 0.3 million . The audit exemption threshold also varies according to member states: some, such as Belgium and Germany, keep it close to the €8.8 million EU threshold, while others - such as Greece, Poland or Spain - keep it significantly lower.
Many participants agreed on the benefit of incremental approaches to gradually raising the threshold, not at EU level but at individual member state’s level, stressing that any increase should be accompanied by an evidence-based impact assessment.
Sara Harvey, Chair of ACCA's auditing technical committee said: "At a time when governments are looking to the private sector to lead the economies of Europe out of recession and into full recovery, auditing and accounting contribution to the achievement of business confidence - in instilling financial discipline and ensuring better corporate governance - should not be treated lightly, even at the small entities level."
Ms Harvey added: "The role of audit in society is important and there is no doubt that having a respected form of auditors looking over the books helps businesses access finance. However, to better tackle SMEs' needs, we should start thinking about introducing a cheaper and quicker scaled-down version of the full audit and involve agreeing procedures with the business to provide assurance on the areas of risk which are of most importance to them, such as cash control, using a 'segmented' approach."
- ends -
For further information, please contact:
Cecile Bonino
tel:+32 (0) 2 286 11 37
mob: +44 (0) 7809595008
Notes to Editors
1. ACCA’s paper on Restating the Value of Audit is available at http://www.accaglobal.com/page/3305046 :
2. ACCA is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management. We have 362,000 students and 131,500 members in 170 countries worldwide.
3. ACCA has worked with governments, national organisations and development agencies in emerging economies- for over 20 years- promoting the accounting profession, to create value for the communities, businesses and individuals it serves.
4. ACCA believes that globalisation of business means that one set of reporting standards is essential. We favour the principles-based IFRS.
5. ACCA understands the real issues facing small businesses as 63,000 of our members work in SMEs or small partnerships worldwide.