Does your UK company need an audit? How to decide.
The Directors of the company are responsible for determining whether, in respect of each accounting period (year), the company meets the conditions for exemption from an audit. These are set out in s382 of the Companies Act 2006, and apply to companies satisfying two or more of the following requirements:
1. Turnover in that year of not more than GBP 10.2 million.
2. Balance sheet total in that year of not more than GBP 5.1 million.
3. Average number of employees in that year is not more than 50.
The Directors are also responsible for determining whether, in respect of the year, the exemption is not available for any of the reasons set out in section 478 and 479 of the Companies Act 2006; namely that at no time during the year was the company:
1. a public company;
2. an authorised insurance company, a banking company, an e-money issuer, an investment firm subject to the Markets in Financial Instruments Directive (MiFID) or an Undertaking for the Collective Investment in Transferable Securities (UCITS) management company;
3. carrying out an insurance market activity;
4. a special register body as defined in section 117(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 or an employers’ association as defined in section 122 of that Act;
5. a member of a group that exceeded the group exemption limits; or
6. a member of an ineligible group
The exemption is available only if the Directors sign a declaration as required by section 475(3) of the Companies Act 2006 on the balance sheet stating that:
1. for the year in question, the company is eligible to take advantage of the audit exemptions;
2. the shareholders (called Members) have not required the company to obtain an audit of its financial statements for the year in accordance with section 476 of the Companies Act 2006; and
3. the Directors acknowledge their obligations for complying with the requirements of the Companies Act 2006 with respect to accounting records and preparation of accounts.