But ACCA (the Association of Chartered Accountants) warns that cost and administrative burdens will still go up, leading to higher fees for clients.

In the face of strong criticism from ACCA and leading small business organisations, the auditing practises board (APB) has backed down on its original audit independence plans - which were inspired by the Enron Scandal. But, according to ACCA, the remaining proposals will still prove a needless burden on small and medium sized companies.

John Brace, ACCA President said: “We are pleased that accounting firms will now be able to go on as a one stop source of business advice to their small business clients. This is a victory for common sense. But the new standards will still limit the ability of auditors to act for clients: in particular, they will no longer be able to represent their clients in front of tax tribunals.

The new rules on auditor independence will apply regardless of whether there is a public interest dimension. Only the very smallest companies will receive a temporary exemption, and this is of limited value. Most companies that qualify for exemption – those below £5.6m turnover – have already opted not to have an audit. And even when they have not, the APB wants any exemption from its independence rules to be disclosed in the audit report.”

Many commentators believe that this will devalue the audit and make it harder for small companies to raise finance.

John Brace added: “The new standards go well beyond the international consensus which is developing in this area. The problem is that they treat small businesses as an afterthought – designing rules for Stock Exchange companies and imposing them on the High Street. The APB needs to think small first.”

As Featured in the November issue of Business Independent.