Effective Internal Controls Are Essential for Every Commercial Business, Regardless of Their Size, Say ACCA and EFAA

London, United Kingdom, February 21, 2010 --(PR.com)-- “We support efforts to reduce or eliminate burdens where their identifiable net benefits are exceeded by the costs of compliance, but we do not believe that allowing member states to exempt micro-companies from the current, standard requirements to prepare and publish annual accounts would achieve any significant reductions towards this aim” say ACCA (the Association of Chartered Certified Accountants) and EFAA (the European Federation of Accountants and Auditors for small and medium-sized enterprises) in a joint position paper sent today to MEPs.

The paper has been sent ahead of the vote in the European Parliament on the report on the EU Commission proposal to amend Directive 78/660/EC on the annual accounts of certain types of company.

Both ACCA and EFAA are committed to reducing administrative burdens for SMEs and making compliance easier and cheaper. This position is shared by UEAPME, the voice of small businesses in Europe.

“However, the main effect of adoption would be to reduce the amount of corporate information which is freely available to users via the public record” says Dr Steve Priddy, ACCA’s Director of Technical policy and Research.

According to Federico Diomeda, CEO of EFAA “this could have adverse consequences for cross-border comparability of performance, standards of financial management in small companies, result in a lack of transparency and, potentially, even have implications for the incidence of financial crime”.

Given the special character of limited liability enterprises, such controls are particularly relevant to the objective of protecting the interests of members and third parties. “Limitation of liability for a company’s debts should always be accompanied by an obligation of transparency”, Federico Diomeda adds.

Accounting information needs to be prepared by businesses for reasons other than simply to comply with the requirements of the Accounting Directive, such as meeting the requirements of the tax authorities and, very often, of lenders of finance. The importance of obtaining reliable accounting information for the purpose of safeguarding the interests of shareholders should also not be under-estimated.

“Effective internal controls are essential for every commercial business, regardless of their size”, Steve Priddy stresses.

The European Commission is engaged in a further exercise to identify the average costs of financial reporting to small companies.

“In view of this on-going work we consider it to be unreasonable to deal with the reporting rules for one class of company separately” and “recommend that an integrated approach be taken to reform the rules on accounting and reporting by limited liability companies and that this process should incorporate thorough impact assessment” says the joint position paper, which, in line with the opinion of the ECON Committee of the European Parliament, concludes in urging the European Commission to withdraw its current proposal, and to come back with a comprehensive proposal of revision of the 4th and 7th Company Law Directives.

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