The headline thresholds for companies that are required to be audited have not changed for a number of years: £10.2m turnover; £5.1 assets; and 50 staff. However, below the surface are a number of exceptions and you will need to consider these when assessing if your company or group requires an audit this year or next. Hence, the rules are complex and require some careful analysis.
It is often not clear due to the complex nature of the rules whether an audit would be required. So if you are unsure either speak to your existing accountant or feel free to contact Andrew Millet.
Ultimately it is the director’s responsibility to get this right. The accountants have a duty of care to their clients to advise the client if an audit is required; and the accountants should not continue its engagement if the client fails to take their advice. Due to the requirement for accountants to carry out professional enquiries on new client from the outgoing accountants any new accountant ought to not accept an appointment if the client is still maintaining that they wish to avoid an audit.
If you discover that your company or group should have been audited when it was not then you are strongly advised to take legal advice. Directors also ought to notify their D&O insurers and most notably the accountants need to be advised; so that the accountants can rectify the situation. Amended financial statements with an audit report should be submitted to Companies House. The original financial statements will remain on file. Companies Act 2006 Section 1074 allows the removal of “unnecessary material” from Companies House and therefore one may be able to argue with Companies House to remove the original unaudited financial statements.
The risk of getting this wrong for the directors could be catastrophic especially if the company then fails within the next few years. It is quite possible that the courts would find the directors negligent and in breach of their duty. It is also quite possible that the directors would be considered for disqualification as a director. Creditors may also attempt to sue the directors personally.
Attached are some related articles:
https://wisteria.co.uk/2017/06/20/audit-threshold-private-limited-companies/
https://wisteria.co.uk/2019/02/22/the-benefits-of-a-financial-audit/
https://wisteria.co.uk/2018/11/20/what-is-auditing-and-why-is-it-necessary/
Speak to the Professionals
Getting your financial statements audited can add real value to your business. It can help you spot weaknesses in your internal controls, improve business processes and boost the public perception of your company. Here, at Wisteria, our experienced, highly skilled audit team can give you the tools you need to take your business to the next level; we’ll advise you on current business trends, help you get investment-ready and optimise your profits. If you have any questions, contact us today.