Some companies in the UK are required to undergo an annual statutory audit, but depending on their turnover, size and the nature of their activities, many businesses can be exempt.
If you’re a business owner who’s unsure about whether or not you need an audit, or how to go about claiming an exemption, as small business accountants, Berley has the answers for you.
Here’s an overview of the statutory audit exemptions to get you started.
Do you need an audit?
Audits are a way to confirm that your annual accounts, as submitted to the Companies House, are accurate. It not only shows HMRC that you’re a credible company – it’s also a good way to demonstrate to your investors that your accounts are valid.
Small businesses (private limited companies) can opt out of an audit if at least two of the following criteria are met:
- their annual turnover is no more than £10.2 million (this is known as the audit threshold)
- their assets are worth no more than £5.1 million
- they have 50 or fewer employees
However, they’ll still need an audit if the company’s shareholders ask for one, or if the requirement is included in the limited company’s articles of association. It’s also important to note that the nature of your company further determines whether you need an audit or not. For example, small companies who need to comply with financial regulations (like insurance or brokerage companies) require a statutory audit to demonstrate their compliance. We therefore recommend that you talk to your accountant before claiming an exemption. It’s also important to note that the audit exemption threshold changes every few years, so it’s vital to review it to make sure you’re still exempt.
Claiming an audit exemption
Once you’ve established that you’re entitled to an audit exemption, you’ll need to submit a statement with your balance sheet. This statement must refer to the relevant legislation that makes your SME exempt and needs to be placed above the director’s name and signature. A template for the required statement is available on the government’s website but your accountant can easily help you put it together.
An audit as a health-check
If your company does need to conduct an audit, this shouldn’t be seen as a waste of time or a burden. Berley Chartered Accountants believes that a company audit is more than an obligation, it’s an opportunity to gain valuable insight into your business’ weaknesses and strengths and use the information to drive your growth strategies.
As accountants for small businesses, Berley can manage the audit process for you from start to finish. We’re also business growth experts who can help you understand how to use the data from your company audit to plan for the following year.