Audits: they’re complex, stressful and disruptive, but extremely useful, valuable and sometimes even compulsory.
When must a company get an audit? And if you don’t have to hire an auditor, should you get one anyway?
What is an audit?
An audit is the examination of the financial reports and statements of an organisation by someone who is separate and independent from it to ensure honesty and accountability.
The process isn’t just about making sure some documents are there – audits are a breakdown and investigation of your financial affairs. Auditors will interrogate balance sheets, income statements, statements of changes in equity, and so on, to ensure you’re doing everything correctly and legally.
But audits will do more than just examine your financial competence – after one, a good auditor will sit down with you to discuss what is going well in your business and what needs to be improved.
When are audits compulsory?
There are a lot of instances where a company is obligated to get an audit of their annual accounts.
First, you’ll need to get an audit if your articles of association say you must do one within a certain timeframe, or if your shareholders ask for one.
Companies with financial years that begin on or after 1 January 2016, meanwhile, must get an audit if they meet any of the two criteria:
- an annual turnover of £10.2 million or above
- assets worth £5.1m or more
- above 50 employees.
For companies with financial years beginning between 1 October 2012 and 31 December 2015, these criteria change slightly:
- an annual turnover of £6.5m or above
- assets worth £3.26 or more
- above 50 employees.
If you don’t qualify for a compulsory audit, then you must include a statement published on gov.uk that says you are exempt from an audit on the balance sheet of your accounts.
Companies that must have an audit
However, certain types of companies must get an audit at any time in the financial years if it is one of the following:
- a public company (unless it’s dormant)
- a subsidiary company (unless it qualifies for an exemption)
- an authorised insurance company
- carrying out insurance market activity
- involved in banking
- an issuer of electronic money (e-money)
- a Markets in Financial Instruments Directive (MiFID) investment firm
- an Undertakings for Collective Investment in Transferable Securities (UCITS) management company
- a corporate body and its shares have been traded on a regulated market
- a funder of a master trust pensions scheme
- a special register body
- a pensions or labour relations body.
I don’t need to get an audit, should I get one anyway?
Audits are extremely valuable and beneficial to any firm getting one, and the advantages of one almost outweigh any disruption it may cause.
For instance, they are a great opportunity to identify internal procedures that can be improved, while guarding against risks. Again, a good auditor will talk you through their findings and give advice on how you should plan for the future.
Audits are also a great tool for assurance. First, you’ll be able to get back to work safe in the knowledge your company’s financials are true and correct. Second, you’ll be able to share these findings with your shareholders, giving them renewed confidence in your company and competence.
Meanwhile, audits are compulsory for some bank loans, and any new investor worth their salt will be looking for one before they hand you their money.
So, why not arrange a company audit today? We know the best auditors out there, and would only be more than willing to point you in the right direction.
Talk to us about your business.
