On 6 September 2012 the Government published its response to the
Department for Business Innovation and Skills' consultation
paper "Audit exemptions and change of accounting
framework" which detailed the Government's decision to
reform the rules on accounts and audit for companies and LLPs. As a
result the Companies and Limited Liability Partnerships (Accounts
and Audit Exemptions and Change of Accounting Framework)
Regulations (the Regulations) were published on 11
September 2012 and came into force on 1 October 2012.
The Regulations create a number of new exemptions and widen
certain existing exemptions in relation to the requirements for
companies to prepare, file and audit annual accounts under Part 15
of the Companies Act 2006. Key changes include:
provided a company or group qualifies as 'small' under
section 382 of the Companies Act 2006, the separate turnover and
balance sheet thresholds required to qualify for audit exemption
will cease to apply;
qualifying subsidiaries may be exempt from the audit
requirement provided that, among other things, its parent
undertaking guarantees the subsidiary's liabilities outstanding
at the end of the relevant financial year;
dormant subsidiaries may be exempt from the obligation to
prepare and file individual accounts for a financial year, again,
provided its parent undertaking guarantees the subsidiary's
liabilities outstanding at the end of the relevant financial
widening the circumstances in which a company or group
producing accounts in accordance with international accounting
standards may switch to produce accounts in accordance with the
Companies Act 2006; and
adding to the list of documents that the Registrar is required
to publish, the documents that the directors of a subsidiary must
file when seeking to use an exemption from the obligation to
prepare, audit or file accounts.
The Regulations also amend the Limited Liability Partnership
(Accounts and Audit) (Application of Companies Act 2006)
Regulations 2008 to largely duplicate the effect of the changes
made in relation to companies with minor variances to reflect the
differences between the nature of companies and LLPs.
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It is true that accountants are well ahead of most other professions when it comes to risk management and certainly, the "big four" have had in place risk management processes and dedicated resources far earlier than solicitors.
From 1 October 2012, subsidiary companies will no longer need to have their annual accounts audited provided that, among other things, their parent company agrees to guarantee all liabilities of the subsidiary that are outstanding at the end of that financial year.
Three new proposed accounting standards from the Accounting Standards Board (ASB) are set to change the face of UK financial reporting.
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