I have just been engaged in an enjoyable 140-character debate with Paul Bulpitt who is one of the more forward-thinking accountancy firm founders.
Sparked by the Government’s announcement that they intend to deregulate the audit and accounting rules for UK limited companies, we were trying to work out what this would mean for the accountancy profession, the business community and the companies themselves.
The sticking point we had was whether, as a quid pro quo for limited liability to creditors, companies should be required to do something; something over and above what sole trader and partnership businesses are required to do.
Paul’s view, and I am sure it is one held by many, is that limited companies must be required to provide evidence of sound financial management. Currently this is (supposedly) achieved by the compilation of detailed statutory accounts, which are filed at Companies House.
But is filing a nine-month old, summary balance sheet fit for purpose? I think not, and experience shows that doing so does not protect the suppliers to badly-run companies.
Sole Trader and Partnership businesses can compile accounts in pretty much any format they choose. Their only requirement is to be able to provide financial information to be entered onto a self-assessment tax return. Why should small, owner-managed, limited companies have more compliance to do?
Either all small businesses (sole traders and partnerships are almost exclusively “small”) should have to meet a higher standard of demonstrable financial management, or none should.