Vic Towler FCCA
The audit thresholds have increased several times over my auditing 'life time', and whilst some companies have breathed a sigh of relief over not having to go through this scrutiny, more companies than ever have found themselves volunteering for an audit. Volunteering for an audit? Are they mad? Why would anyone bother having one if they didn't have to by law? Well, there are many advantages that can be easily overlooked, which will be discussed further down this article.
Whether or not you require an audit by law can be difficult to ascertain, but as a general rule the following conditions must be met (for standalone companies):
- Your company must be an eligible business (ineligible businesses include: FSA registered businesses, traded companies etc.);
- The shareholders with more than 10% of share capital must not have requested an audit; and
- The company must comply with 2 out of 3 of the following criteria for two consecutive years:
- Turnover must be less than £10.2m
- Gross assets (fixed + current assets) must be less than £5.1m
- Employees (headcount, not full time equivalent) must be less than 50
If you do not meet these conditions, your standalone company must have an audit. There are further consideration for groups of companies.
If you wish to have an audit, the advantages include:
- Having an audit provides assurance to any directors or shareholders who are not involved with the day-to-day running of the company that all is as it should be.
- If you were thinking of selling your company, having an audit enhances the credibility and reliability of figures provided to perspective purchasers.
- Having an audit helps to identify any weaknesses within the business and accounting systems.
- If you wanted to raise finance, audited accounts are more credible to lenders.
- Having an audit can assist in helping to reduce the scope for fraud.
This list is not exhaustive but some of these issues are highly relevant for business owners.
If you would like a chat on the benefits to your company of having an audit or if you are not sure if your company requires a statutory audit, please get in touch.