Although the owners of up to 36,000 small and medium-sized enterprises (SMEs) in the UK will no longer have to have their accounts audited, many may not be aware that they can still be required to have an audit if certain criteria are met.
As of 1 October this year, small businesses do not need to subject their accounts to an audit if they meet two out of the three qualifying criteria for small company accounts.
To be exempt, a company must achieve two out of three of the following being fewer than 50 employees or having gross assets totalling no more than £3.26m or a turnover below £6.5m.
In addition, subsidiary companies will be let off mandatory audits if their parent companies guarantee their liabilities, while dormant subsidiaries, up to 67,000 in number, will no longer need to prepare and file annual accounts, provided they receive a similar guarantee.
However, even if a small company meets these criteria, it must still have its accounts audited if a member or members holding at least 10 percent of the nominal value of issued share capital, or holding 10 percent of any class of shares demands it, or, in the case of a company limited by guarantee, 10 percent of its members in number.
The demand for the audit of the accounts should be in the form of a notice to the company, deposited at the registered office at least one month before the end of the financial year in question. The notice may not be given before the financial year to which it relates.
There is no longer a particular category for audit exempt charitable companies in England and Wales or Scotland. These will qualify for audit exemption under company law in the same way as any other company.
As an accountant, Nigel Fry, specialises within the audit and accounting sector.