For UK Golf Clubs, they may require a statutory audit depending on their size, governance structure, and the expectations of their members. While statutory audits are not always mandatory for such clubs, there are circumstances where an audit is either required or desired. However, due to changes in audit and accounting standards requiring more robust and detailed procedures they are becoming more costly.
For clubs seeking to reduce costs, viable alternatives exist, offering an appropriate level of oversight and assurance tailored to their unique needs. Throughout this piece, we’ll explore the audit landscape for UK golf clubs, examine when audits are necessary, and delve into cost-effective alternatives that can maintain member confidence.
Is an audit required?
For most golf clubs in the UK, statutory audit requirements do not hinge on their size, but it can do. Clubs that are considered small under the Companies Act 2006 may be exempt from mandatory audits if they meet at least two of the following criteria: turnover of no more than £10.2 million, a balance sheet total of no more than £5.1 million, and no more than 50 employees. However, this exemption is often overridden by the club’s internal governance rules or the preferences of its members. Many golf clubs require an audit regardless of size, whether they operate as companies limited by guarantee, limited by share capital or are unincorporated where it is explicitly stated in their articles of association or other governing documents. Additionally, a statutory audit can be triggered if a certain proportion of members—typically 10%—request one. This rule proportion rule can be complex depending on the ownership structure of the club.
Whilst not a statutory obligation, an audit may also be requested as a condition or covenant of a loan or other finance arrangement provided to the club. Other clubs whilst not required to, opt for a voluntary audit as part of their best practice and governance regime.
However, more and more clubs are now weighing up the benefits of a full audit against the rising costs and are looking at audit alternatives, with some changing their articles such that an audit is no longer required or holding votes on whether one is requested by the members. In these instances, clubs no longer bound by legal or constitutional obligations to undergo a statutory audit can consider cost-saving alternatives that still provide valuable oversight of financial activities.
Are there any audit alternatives?
One common alternative is to prepare unaudited financial statements accompanied by an accountant’s report. This option involves external accountants compiling the financial statements but without conducting an assurance engagement. While this approach is the most affordable, it does not provide the club’s directors or members with any assurance about the accuracy or reliability of the figures included within the statements. The lack of independent validation might not satisfy members who seek reassurance about the integrity of the financial information. For clubs where transparency and accountability are priorities, this may not be the best option.
Limited Assurance Review Engagements
A more suitable middle ground for many clubs is a limited assurance review, conducted under the International Standard on Review Engagements (ISRE 2400). This type of engagement provides a level of assurance that may be considered both proportionate and cost-effective. Unlike a full audit, a limited assurance review does not involve extensive substantive testing of the financial records. Instead, the review primarily consists of analytical procedures and limited verification of specific items. This streamlined approach allows the external reviewer to form a negative assurance opinion, meaning they state that nothing has come to their attention that suggests the financial statements are not prepared in accordance with applicable accounting standards and legal requirements.
The conclusion of a limited assurance review is framed in terms of what the reviewer has not found, rather than providing a definitive positive statement that the financial statements are true and fair, as is the case in a statutory audit. For example, the conclusion might read: “Based on our review, nothing has come to our attention that causes us to believe that the financial statements have not been prepared so as to give a true and fair view of the company’s affairs as at [date], and of its profit or loss for the year then ended, in accordance with United Kingdom Generally Accepted Accounting Practice and the requirements of the Companies Act 2006.” This distinction highlights the lower level of assurance provided compared to a statutory audit.
However, a limited assurance review still offers several advantages. First, it satisfies the need for some degree of independent scrutiny, which is often crucial for maintaining member trust. Second, it can be tailored to address specific concerns of the club’s members or directors. For example, if there are concerns about certain revenue streams, such as membership fees or bar and catering income, these can be included in the scope of the review, providing targeted assurance without the need for a full audit. This flexibility can ensure that the cost of the review remains proportionate to the club’s financial scale and complexity.
Moreover, the reduced scope of testing in a limited assurance review translates to lower fees, which is a key consideration for clubs operating on tight budgets. While the overall level of assurance is lower than that provided by an audit, the independent opinion offered can strike a balance between cost and the desire for accountability. This is making it a more popular choice among golf clubs that wish to demonstrate transparency to their members without incurring the significant expense of a statutory audit.
How Hillier Hopkins can help?
Clubs considering an accountant’s report or a limited assurance review should consult with their accountants or auditors to determine the most appropriate scope of work. It is essential to communicate with members about the nature of the review and how it differs from a full audit. Transparency about the decision-making process can help manage expectations and ensure that members understand why a limited assurance review is being chosen as a practical and proportionate option.
In summary, while few UK golf clubs are required to undergo a statutory audit due to their size, many still do so, either due to their articles of association or the preferences of their members. For clubs seeking to reduce costs, alternatives such as unaudited financial statements with an accountant’s report or a limited assurance review under ISRE 2400 offer viable options. While unaudited financial statements provide no assurance, a limited assurance review strikes a balance between cost and accountability, offering a tailored, independent opinion that satisfies most members. By exploring these alternatives, golf clubs can align their financial oversight practices with their size, complexity, and budget, ensuring they remain financially transparent while managing costs effectively.
If your club is uncertain of whether it requires an audit or it would like to know more detail in relation to accounting certificates, limited assurance reviews or the practicalities of changing between these engagements, Sam Hodson and Hillier Hopkins are available to advise.
