The regulation to increase the audit exemption from 1m to 5.6m came into force on 30 January. The new thresholds for SMEs will take effect for financial years ending on or after 30 March 2004.

As a result in the rise of the threshold, 69,000 more companies will be exempted from the requirement to have their accounts audited.

However, commenting on the rise, ICAEW president David Illingworth said: 'We remain concerned that this decision is being made without sufficient evidence to demonstrate the benefits. We will continue to press government to ensure that there are suitable safeguards and preventative measures in place to address these issues.'

The regulation adds the Institute of Chartered Secretaries and Administrators (ICSA) to the list of bodies whose members are entitled to act as reporting accountants (that is to prepare a statutory report on the annual accounts of smaller charitable companies in place of a full audit report).