Disclosure to public has been found to be benefit for companies in several ways, for instance, improving future liquidity, reducing cost of capital and lower unrealistic risk (Diamond and Verrecchia 1991). However, corporate disclosure is costly as some helpful proprietary information could be obtained by competitors (Jansen 2005). To protect the small and medium-sized companies surviving in competition in the market, the UK government has permitted partially release of financial reporting or exemption of audit for private companies.
As a regular commercial process, audit has been to afford neutral verification from the third-party institution about the financial accounts and reports of one firm or organisation. Watts and Zimmerman (1983) stated that audit provides estimable assurance to financial reporting external users like investors and lenders. Healy and Palepu (2001) argued that external disclosure can help to intermediate the stock of firms in capital market. Verrecchia (1983, 1990) found that managers prefer external disclosure to exemption of audit as the former choice can bring benefit in mitigating information asymmetry even though such choice is costly for competition. In addition, public disclosure also establishes an effective setting for reliable information to weaken the higher cost of capital from information asymmetry (Ball et al. 2000). Therefore, audit and public disclosure play a key role as mitigation of information asymmetry in capital market.
从历史上看，英国审计政策采纳了通用的强制审计；然而，这一政策已改为公司法1989为增加审计成本导致成本不成比例的让步对小公司（美国和该2010）。根据Collis（2010），欧洲联盟（欧盟）成员国可以选择免征小实体，为小型和中型公司可以准备“修饰”或“缩写”账户来代替普通的全账户资格的法定审计。因为有近2000万的中小企业在欧盟和那些非金融经济，可以提供67%的就业在私营部门的99.8%，小型和中小型企业（中小企业）已经在欧盟经济的主要支撑（schmiemann 2008）。在同样的情况下，SMEs在英国经济中也发挥着重要的作用。数据显示，私营单位翻了一番，自上世纪80年代以来，从240万增加到480万，主要为微型企业成长和一人公司（DTI 1997）。国际清算银行（2010）的记录指出，98.15%的英国公司是小公司，其贡献率为营业额的30%和31%的就业率。因此，欧盟成员国以及英国给选择中小企业放弃法定审计为了留下足够的发展空间并推动欧盟与英国经济。
Historically, the adoption of UK audit policy was universal mandatory audit; however, this policy has been changed to the Companies Act 1989 as the increased cost of audit leaded to disproportionate cost concession on small companies (Dedman and Kausar 2010). According to Collis (2010), Europe Union (EU) member states are allowed to opt to exempt from statutory audit for small entities and those qualifying as small and medium-sized companies can prepare ‘modified’ or ‘abbreviated’ accounts to replace the regular full accounts. Because there are nearly 20 million small and medium-sized enterprises in the EU and 99.8% of those in the non-financial economy which can provide 67% of the employment in private sector, small and medium-sized enterprises (SMEs) have been the main support of economy in the EU (Schmiemann 2008). In the same situation, SMEs also have played important role in the UK economy. The data showed that private entities doubled since the 1980s, increased from 2.4 million to 4.8 million, mainly as growing in micro firms and one-person firms (DTI 1997). The record of BIS (2010) notes that 98.15% of UK companies were small ones and whose contributed 30% of turnover and 31% of employment. Therefore, the EU member states as well as the UK gave the options to small and medium-sized firms to forgo the statutory audit in order to leave enough development space for them and then boost the economy of EU and UK.