The FSA has issued a consultation paper outlining proposals to remove the statutory audit requirements under the Companies Act for small firms and Appointed Representatives (ARs).
The FSA estimates that, if introduced, this would save 3,200 small firms and 1,490 ARs £12.9m each year. Most of the firms that benefit are likely to be financial advisers.
The average cost of a statutory audit for a small firm or an AR is estimated to be between £2,150 and £3,370. Using an average audit cost of £2,760, this will produce savings of £8.9m for small firms and £4m for ARs.
The proposal is backed by the Department of Trade and Industry (DTI).
The FSA consultation period will run for two months from 7 April. Subject to the necessary support for the proposal, the FSA aims to revise its Handbook by the end of the year.
Stephen Bland, director of small firms at the FSA, said: "We are committed to better regulation. Small limited liability companies currently compete with sole traders and partnerships which are not subject to audit. We are working with the DTI to produce a level playing field for these small firms which should promote competition and thus bring benefits to consumers."
The FSA has considered whether this change would affect the amount of protection for consumers dealing with these small firms and ARs. It believes that the degree of protection would not be reduced for the reasons that most small authorised firms are now subject to the Retail Mediation Activities Return (RMAR).
In addition, the capital requirements for firms will remain unchanged and any firm holding client money will still be required to have a client money audit.
