September 20th, 2016 Insights
It is well known that some UK companies are required by law to have their annual financial statements externally audited.
It is well known that some UK companies are required by law to have their annual financial statements externally audited. Other companies are exempt from the statutory audit requirement due to their size or, in a few rare cases, their nature.
Those companies which fall below certain financial and size thresholds are typically exempt from having an audit requirement, unless they are members of a group which – when considered in aggregate – is required to have an audit. There is nothing in statute to prevent any company from undertaking an audit if it wishes to do so, regardless of size or absent any statutory obligation.
From 1st January 2016 the thresholds for determining company size for accounting purposes have changed.
Who is exempt from the UK statutory audit regulations?
Charities – any charity whose gross income is less than £1,000,000 annually for accounting periods ending either on or after 31 march 2015 (£500,000 or less for prior financial periods), unless both that charity’s gross assets exceed the £3.25 million figure and their gross income exceeds £250,000, will be able to opt out of having a full audit of their financial statements.
However, many charities are required to obtain alternative assurance in some form, such as an independent external examination of their financial statements.
Companies – where a company qualifies as a small company under the 2006 Companies Act, they can typically expect to be exempt from audit, unless they are members of a group of companies which is itself subject to the statutory audit requirement.
The definition of a small company for audit purposes is where it came in below at least two of the following criteria for both the current and prior financial period;
- From periods ending before 1st January 2016, turnover less than £6.5 million, total assets less than £3.26 million and fewer than 50 employees (fouling any two of these will trigger than mandatory audit requirement)
- From periods ending on or after 1st January 2016, turnover less than £10.2 million, total assets less than £5.1 million and, as with periods ending before 1st January 2016, fewer than 50 employees.