The objective of an audit is to allow the auditors to form an opinion on the financial statements of a company. The audit does not relieve the directors of any of their responsibilities as they are still responsible for the preparation and presentation of the financial statements. It is not the auditors’ function to prevent fraud and/or error, this is the responsibility of the directors.
A company’s annual accounts for a financial year must be audited unless the company:-
For audit exemption a company must qualify as small, or have qualified as small in the previous year & therefore be in a year’s grace.
The financial criteria for assessing if a company is small are that two of the following conditions must be met:
For financial years commencing prior to 1st January 2016:
For financial years commencing on or after 1st January 2016:
If the company is part of a group then the group as a whole must meet the above criteria.
Additionally, the company must not be ineligible for any part of the year (PLCs, banking and insurance companies, etc., listed under CA 2006 s384);
The company must not be part of a group that does not qualify as it includes ineligible companies under the previous point.
Even if a company is exempt due to the above an audit may be required if members with 10% of a class of shares request an audit.
There are a number of things that can be done to ensure that an audit runs as efficiently as possible.
Firstly, make sure that all accounting staff are available during the time that the auditors are on site with you.
Secondly, below is a summary of some of the main documents to be prepared in advance of the audit. If the documents are all readily available disruption to your staff members during the audit will be minimised:
This note does not contain a full statement of the law and it does not constitute legal advice. Please seek legal advice if you have any questions about the information set out above.
Copyright © 2013 - Oury Clark.