Within the UK there are certain audit and reporting regulations to adhere to if you run a business in line with EU law. The government feels that these audit regulations produces confidence in the market through clearly demonstrating the corporate framework.
There are however, some circumstances where you will be exempt from these audit responsibilities and you may decide this yourself, subject to applying the rules to your own business.
In order to be exempt from statutory audits, you must meet two out of the three criteria. These criteria are:
- Balance sheet total – your business must have assets worth less than £3.26 million in order to fall into audit exemption.
- Turnover – your turnover each year must be less than £6.5 million
- Number of employees – you must have less than 50 employees
You can see that your audit exemption may change year on year so it is vital that you keep watch on these three indicators to ensure that you remain exempt from your audit requirements.
Where you are exempt, there is a statement that can be found on www.gov.uk to include with your balance sheet. Whilst you are exempt from producing a mandatory audit, your shareholders who own at least 10 per cent of shares ask for an audit. 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.
In 2012, the mandatory audit regulations made amendments so that these fell in line with accounting threshold and allowed more than 36,000 small businesses and LLPs to be removed from having to complete a mandatory audit. In addition to small businesses and LLPs being exempt, all subsidiaries are exempt as long as their parent company acts as a guarantor for their liabilities.
A government impact assessment by the Regulatory Policy Committee suggests the removal of mandatory audits in small businesses will save them £304 million.
It is worth noting that your business may have to complete an audit even if they meet the exemption requirements. You should check with you accountant about whether you fall into this category and what you need to do in order to comply.
If you would like to know more about audit exemption and how this can affect your business, please call us now on 020 7636 9094, complete our Free Online Enquiry or email us on firstname.lastname@example.org and we’ll be happy to help.