Within the UK there are certain audit and reporting regulations to adhere to if you run a business in line with UK law. The government feels that these audit regulations provide confidence in the market by clearly demonstrating the corporate framework.
There are two types of audit: statutory audit and non-statutory audit. A statutory audit, as the name suggests, is required by the government and often applied to specific companies like banks and financial institutions. Small private limited companies may be exempt from such an audit. A non-statutory audit, although not required by law, can happen for other reasons, such as when shareholders ask for an audit to pinpoint strengths and weaknesses.
In this post, we look at audit exemption for private limited companies.
How to tell if your company is exempt
Most small private limited companies and micro-entities are usually exempt from statutory audits if they meet two out of the three criteria for both the current and the previous financial year. These criteria are:
- Balance sheet total – your business must have assets worth less than £5.1 million
- Turnover – your turnover each year must be less than £10.2 million
- Number of employees – you must have less than 50 employees on average
As the requirements may change year to year, it’s vital to keep an eye on these indicators to ensure that you remain exempt from your audit requirements.
What to do if you’re exempt
If your company qualifies for an audit exemption, then you must write the audit exemption statement on the balance sheet of your accounts. An example of this exemption statement can be found on this gov.uk page.
When you will need to do an audit
Even if a company is exempt, an audit can still be forced if shareholders representing 10% or more of the company’s shares request for one to be performed. In order to make this request, they have to put it in writing and send it to the company’s registered office, and they must do this so the request arrives at least 4 weeks before the end of the financial year.
Certain companies are also not entitled to an audit exemption. These include public companies, insurance companies, banking companies, e-money issuers, MiFID investment firms and UCITS management companies. Note that these apply throughout the whole year, so for example if you started the financial year as a public company and finished it as a private one, you will still be ineligible for the exemption in that year.
Contact Berley today
Regardless of the size of your company, our auditors can tailor our company audit services to suit your requirements. For large companies, we can help to enhance your existing financial control systems by providing regular management reports that support the identification of potential problems. For smaller companies, even though you may be exempt from statutory audits, we can help by offering a valuable analysis of key figures, ratios and other data to help you uncover your next opportunity of growth.
Call us now on 020 7788 8261 or complete our Free Online Enquiry Form.
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This post is intended to provide information of general interest about current business/ accounting issues. It should not replace professional advice tailored to your specific circumstances.