DOZENS of growing companies in York and North Yorkshire may find it far harder to access outside funding after the introduction of tough new auditing standards, one of the county's biggest independent firms of accountants has warned.

Small businesses risk losing vital development funding if they choose not to have audits after the new standards take effect from December 31, said accountants and business advisers practice JW Pickles and Co.

The Selby-based firm fears many hard-pressed small and medium enterprises (SMEs) may choose not to have audits because of the increased costs involved with the new rigorous auditing procedures introduced by the UK Auditing Practices Board (APB). The procedures are being introduced to avoid a repetition of international financial scandals such as Enron and Parmalat.

Since 1995, small businesses have been able to opt out from having their accounts audited. The turnover threshold has now risen to £5.6 million, but many smaller ventures choose to have audits to reassure potential investors, banks and other sources of finance.

There is a growing small business culture in York and North Yorkshire, particularly among IT, bio-science and other research and development businesses which need injections of outside capital to take their innovations to the target market.

David Ingall, partner at JW Pickles, said: "The new audit standards were drafted with large plcs in mind but apply to all companies with very limited exemptions and so fees are forecast to increase significantly.

"This will put an appreciable burden on some small business clients and many may choose not to have audits as a result.

"Our concerns are that if they feel this is their only option, it will create a vicious circle as it is likely to prevent them from attracting capital vital to their growth, as lenders insist on audits to demonstrate that the business is well run. Also, the increased requirements on audit firms may lead to smaller ones ceasing to act as registered auditors. This will restrict the availability of this professional service to growing businesses."

Updated: 10:42 Friday, October 14, 2005