For most companies this is a legal requirement, though there is an exemption in place for small private limited companies. Although the need for an audit is optional for smaller companies, it is still necessary to file accounts with Companies House every year.
Are You Exempt?
To be exempt from an annual accounts audit your company has to meet the following three requirements:
- Has an average of 50 or fewer employees.
- Has an annual turnover of no more than £6.5 million.
- Have assets worth no more than £3.26 million.
If your company meets those criteria then you can wave goodbye to that annual audit, but you have to include an audit exemption statement with your accounts balance sheet. This statement makes it clear that you are exempt from an audit.
Exceptions To The Exemption
However, even if you meet the qualifying criteria for audit exemption there are some circumstances under which you will have to undertake one.
If your company’s articles of association list an audit as a requirement then you must have one. Likewise, if shareholders who maintain a minimum 10% stake in the company shares (this can be a single shareholder or multiples) request an audit then you are obligated to carry one out. If shareholders want to request an audit this must be done in writing and sent to the company’s registered office. The request must be made with at least one month remaining in the financial year.
If at any point in the year the company traded as a public company then an audit is mandatory. An audit is also a legal requirement if your company is involved in banking or insurance. There are other circumstances under which a qualifying company must have an audit, which can be found on the Government’s website.
Obviously this decrease in mandatory auditing will save smaller companies time and money, and increase their flexibility. However, the need for an audit shouldn’t be overlooked. Audits can be crucial for identifying problem areas in a company and helping the business adapt, develop and grow in accordance with the audit’s findings. They can also help in the prevention of possible fraud and this has a positive impact on confidence levels from shareholders, clients and suppliers.
