Many medium-sized companies could be released from mandatory audit requirements under new proposals intended to simplify corporate reporting.
The Department for Business, Innovation, Science and Trade (DBIST) launched its ‘modernising corporate reporting’ consultation on 7 September 2026, with responses invited until 30 November 2026.
The proposals form part of the Government’s wider ambition to reduce the administrative burden facing businesses by 25 per cent by 2029.
If introduced, the reforms could therefore have a significant impact on the reporting obligations of medium-sized businesses.
How could audit requirements change for medium-sized businesses?
The Companies Act 2006 uses company size criteria to determine which accounting, reporting and audit requirements apply.
Under the proposals, medium-sized companies could gain access to exemptions currently available to small businesses.
To fall within the relevant size criteria, a business must not exceed at least two of the following three thresholds:
Qualifying companies could potentially avoid the requirement for a statutory audit as well as requirements to prepare cash flow statements and consolidated accounts.
The consultation also considers wider changes, including:
Should you stop having an audit if you become exempt?
Removing an audit requirement does not necessarily mean that abandoning audits will be the right choice for every business.
Although audits fulfil an important compliance function, they can also provide independent assurance over a company’s financial information and help identify weaknesses within financial processes.
There may be commercial considerations too.
Banks and other lenders may place greater confidence in audited accounts when deciding whether to provide finance and on what terms.
Audited financial information can also be valuable when preparing to sell a company or attract investment, as potential purchasers and investors are likely to scrutinise the company’s accounts as part of their due diligence.
For businesses that eventually become eligible for an exemption, the decision should therefore take into account the company’s future plans rather than focusing solely on the immediate cost saving.
The proposals remain subject to consultation and may change before any new rules are introduced.
Our team can help you understand your existing audit obligations and consider whether continuing with an audit could still provide value to your business.
