Audits were invented to protect the reader of accounts so that they could be confident that an independent expert had looked at the accounts and confirmed that they give a true and fair view of the financial position and profits and losses of a company. They were considered a reasonable corollary to providing limited liability to shareholders.
Audits have become increasingly stringent and onerous because government wants to ensure that where an audit exists, it can be relied upon. This means that they have become too complex and costly for smaller companies, and so in recent years, a small company is likely to be exempt from audit.
A company is small if it meets certain thresholds, which are now the same as the definition for filing small company abbreviated accounts. If a company is small and it is not prohibited from claiming audit exemption, it does not need an audit.
What would prevent a small company claiming exemption?
- Companies involved in certain industries (banking and insurance) are unlikely to be small but always need and audit.
- Members of a group of companies (a parent or subsidiary) unless the whole group is small or the parent has given a statutory guarantee.
- Companies governed by regulations that require audit – for example, certain registrations by the FCA require audits.
- Where shareholders give notice to the company that they require an audit.
What to do?
Contact us and we will be able to give you a definitive answer on whether or not your company or LLP needs and audit. Call us on +44 (0)330 024 3200.