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Are audited accounts necessary?

Are audited accounts necessary?

I have read this and want to check whether it is true. Limited companies that are 'small' as defined by the Companies Act, do not have to file audited accounts. Although it may be advisable, it is not mandatory. 'Small' is defined as less than £6,500,000 turnover, 50 employees, net worth less than £3,260,000. Is this true?

If a small company has a holding company, and the holding company is non trading, could the trading 'small company' voluntarily prepare audited accounts, but the holding company not prepare audited accounts?


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05th Dec 2011 17:07

In order to be exempt for audit, the company must be:

1) Small, and

2) Total assets should be <£3.26m and

3) Turnover should be <£6.5m.

In order to be small, a company has to meet 2 out of 3 criteria below, for 2 years running (or 1 year if it is the company's first accounting period):

1) Turnover < £6.5m

2) Total assets < £3.26m

3) Employees <50.

There are separate criteria for groups, which I will avoid going into for now, but if a company is not small, its parent cannot take advantage of small company exemptions either. Also if a group is not small, it needs to be audited, as well as the requirement to prepare group accounts.

However, if all criteria for audit exemption are met, and a small company chooses  to have an audit voluntarily despite turnover  being <£6.5m and assets being <£3.26m, the parent company does not then have to be audited if it is not required to have an audit, just because the subsidiary opted for a  voluntary audit.




Thanks (2)
06th Dec 2011 11:49

Unlikely but there may be other reasons you need an audit

e.g. The bank require you to have one.....or your articles require one..........

or you are excluded from the small companies exemption under s.478 Companies Act 2006.

or if 10% or more of your members give notice that they require one ..s.476

and don't forget that not only do you have to be a small company....but also the turnover must be less than £6.5M......and the balance sheet total not more than 3.26M

so if your turnover is £100K and you have 2 Employees but your gross assets are £4M

you are a small company but will need an audit.

Thanks (1)
07th Dec 2011 13:54

2 out of 3

Audit exemption applies if 2 out of 3 of the conditions are met.

Thanks (0)
to xiaoxin
07th Dec 2011 14:15

My copy of the Companies Act 2006

Kent accountant wrote:

Audit exemption applies if 2 out of 3 of the conditions are met.

S.477 says and and and

the 2 out of 3 is the small company qualification to meet condition (a)

Thanks (0)