Exemption from audit

The Companies Act 1985 requires each company to have its financial statements audited by a registered auditor unless it is audit-exempt.

Audit exemption threshold

Small companies with annual turnover of less than £6.5 million and gross assets less than £3.26 million may claim audit exemptions.

Many companies are confused this exemption with the definition of a small company as set out in the Companies Act. Some companies which qualify as small company are nevertheless required to have their accounts audited.

Companies fall under this category are:

• Parent or subsidiary companies
• Insurance broker companies
• Bankers or insurance companies
• Companies regulated under the Financial Services Authory
• Public limited companies
• Charitable companies with gross income of more than £250,000

In addition, shareholders holding more than ten percent of the issued share capital request an audit the eligibility to audit exemption is waived.

Companies claim exemptions from audit are still required to prepare its accounts in accordance with the Companies Act and apply relevant accounting standards and file the accounts with the Registrar of Companies.

Directors must include a statement above their signature on the balance sheet page stating the fact that:

• Exemption from audit has been claimed
• The shareholders (members) have not requested an audit
• The directors acknowledge their responsibility for maintaining proper accounting records preparing accounts based upon those records.
  

Canterbury Accountancy - providing useful information to UK small companies.