Does my company need an audit?
There are a few reasons why your company could need an audit:
- You have outgrown the statutory audit exemptions (see below).
- New investors have included an audit requirement in the funding agreement.
- You might just value the objective independent insight into your accounts and financial processes that an audit will provide.
The statutory audit exemptions are:
- The audit regime only applies to limited companies and LLP’s.
- Unincorporated sole traders and partnerships are exempt whatever their size
When does my company need an audit?
For a non-group company, you will need to have an audit when you exceed 2 out of the following 3 tests;
For a non-group company, you will need to have an audit when you exceed 2 out of the following 3 tests;
- Turnover of more than £10.2m
- Gross Assets of more than £5.1m
- 50 or more employees
Haven’t the limits for audits changed recently?
No, the three tests have been in place since 1 January 2016. Before this date the turnover and gross assets tests were £6.5m and £3.26m for accounting periods beginning before 1 January 2016. The number of employees test has not changed.
Isn’t an audit just an extra expense?
Yes, an audit will bring additional costs to the business but an audit will include reporting on a company’s controls and identifying possible areas of weakness in a business that could, if unaddressed, give rise to losses.
Weaknesses in controls that could allow misappropriated stock, unauthorised sales at unauthorised prices and inadequate insurance cover may be noticed during an audit and control recommendations can be put in place to mitigate the risks.
Are there any other benefits to an audit?
Yes, if you are considering selling your business, an audit in the years leading up to a sale may give further assurance to potential purchasers, regarding the operation and conduct of the business, making it a more attractive acquisition target.
Author: Chris Morey, Director, Plus Accounting
For more information on this matter or to find out about our Audit and assurance services, please contact Chris Morey on 01273 701200 or email chrism@plusaccounting.co.uk.
Any views or opinions represented in this blog are personal, belong solely to the blog owner and do not represent those of Plus Accounting. All content provided on this blog is for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site.
Originally Posted: 9 June 2016
Last Updated: 14 September 2021