An audit is an independent examination of a company’s financial statements to ensure they are accurate and comply with relevant accounting standards. This process provides assurance to stakeholders, such as shareholders and regulators, that the company’s financial reporting is reliable.
What are the requirements?
Your company needs an audit if it meets certain criteria, typically defined by legal or regulatory frameworks. Currently in the UK, an audit is mandatory if your company exceeds at least two of the following thresholds:
- an annual turnover of no more than £10.2 million
- assets worth no more than £5.1 million
- 50 or fewer employees on average
The Audit thresholds are changing for accounting periods on the 1st October 2024 or after to the following:
- Annual turnover exceeds £15 million.
- Total assets exceed £7.5 million.
- The company has more than 50 employees.
Additionally, companies that are publicly traded, classified as Public Interest Entities (PIEs), or are part of a group that meets these thresholds also require an audit. Shareholders holding at least 10% of shares can also request an audit, even if these criteria aren’t met.
How often are audits required, and why do I need an audit?
Audits are generally required annually for companies that meet the criteria. The primary reasons for needing an audit include:
- Legal Compliance: Meeting statutory requirements and avoiding penalties.
- Stakeholder Assurance: providing confidence to shareholders, investors, and lenders regarding the company’s financial health.
- Fraud Prevention: Identifying and mitigating risks of errors or fraudulent activities within the company.
- Improving Internal Controls: Strengthening financial management practices to support business growth.
Exemptions for smaller companies can be seen here.
Voluntary audits: should you consider one?
Even if your company doesn’t meet the mandatory audit thresholds, a voluntary audit can be beneficial. It enhances credibility with investors and lenders, improves internal controls by identifying potential weaknesses, and prepares your business for future growth and compliance needs.
If you’re unsure about your audit requirements or need expert advice, contact us today to ensure your business remains compliant