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John Selwood's Q&A

The complexities of subsidiary and small company audit exemption and the challenges of accounting estimates require careful consideration, as this month’s questions demonstrate.

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Q  Although the audit exemption rules set out in CA 2006 changed significantly with SI 2012 no 2031, I did not think that the eligibility criteria for a small company or a small group were changed by the SI. I believe that if a company is a member of a group, it can only claim small company exemption from audit if the group qualifies as a small group and meets two of the three size criteria. If the subsidiary company qualifies as small, the small companies exemption in S.477 can presumably be taken and the subsidiary company will not require an audit. But in the May 2013 issue you commented that a UK subsidiary of a Jersey company (hence not in the EEA) is not entitled to audit exemption. I am confused. Please provide some clarification.

A  I am well aware of the potential for confusion now that there is the new subsidiary audit exemption as well as the pre-existing small company audit exemption. It is not uncommon for delegates on my courses to mix up the rules but I had hoped that I would not confuse things further. My Q&As in May concentrated upon subsidiary company audit exemption and I had not intended to imply that.................

This is an extract from an article in the July/August 2013 edition of Audit & Beyond, the magazine of the Audit and Assurance Faculty.

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