Hi all, I am not a regular poster, but if you don't mind I would like some reassurance on some guidance I have given.
A potential client has asked me whether or not his small company (ie meets 2 of the 3 requirements to qualify as a small co.) requires an audit. I have said yes I believe it does as total assets exceed £3.26m but he has been told he does not need an audit because his NET assets are below the £3.26m - in fact the Balance Sheet total is negative.
I still believe an audit is required so I guess I am just asking for somebody to confirm I am right (or wrong!).
Many thanks
SG.
Related resources
Replies (8)
Please login or register to join the discussion.
You are right
The conditions for exemption from audit are set out in s.477 CA 2006. You will see that it does not refer to "assets", but to "balance sheet total" which is defined in s.382(5) as the "the aggregate of the amounts shown as assets in the company's balance sheet".
Thanks and what about extending the accounting period?
Euan
Many thanks, appreciate you coming back to me on this.
If you don't mind - I have a second question relating to this. Is it possible to extend the year end in order to avoid the requirement for audit? With this company, total assets three months after the current year end, due to sale of some of the assets below NBV, would mean the company was way below the threshold at the extended period year end. I am assuming it is likely this is not a possible strategy, but they have asked me and to be honest I am just not sure.
Kind regards
SG
If the assets are sold below nbv ...
... then why not revalue now? You would have to look at the appropriateness of the carrying value for an audit anyway, but to answer the query, it would by definition fall out of audit on the Balance Sheet criteria which would apply at the Balance Sheet date (the turnover test would obviously be pro-rated).
It begs the question of last year though?
Thanks again, really appreciate the assistance from thsi forum. I had wondered about revaluing now, the practical point is the fact that the filing deadline is fast approaching so a little more time might be helpful.
Yes, last year ... next question.
SG.
extending the year end - good news and bad news
Good news: as posted above, extending the year end will result in a different balance sheet and so the assets will, it appears, then come under the audit threshold.
Bad news: the deadline for filing isn't extended by extending the year end - it stays the same. So a year ended 31.3.11 has a deadline at Companies House of 31.12.11 (assuming a private ltd co). Extending the year end to become 15 months ended 30.6.11 still requires submission by 31.12.11.
Sorry red leader ...
... but can't agree with that entirely.
For a private company accounts are due nine months from the end of the accounting period, except for the first set which is nine months from the anniversary of incorporation.
You may be confused by the fact extending the accounting period cannot be used to cancel a penalty already due and the attempt to change the period will be declined. e.g. accounts to 31st December 2010 were due 30th September 2011, on 29th September 2011 the AP could have been extended to 30th June 2011, making the accounts due 31st March 2012, on 1st October 2010 the extension would have been refused.
Bear in mind you may only extend once every five years without special dispensations (which are generally unlikely), so you may scupper future potentials so I would favour re-valuation to keep more future options open.
Interestingly though, if on 30th September 2011 an notice shortening the Accounting period to 30th June 2010 (or even to 31st January 2010) were filed, the accounts would be due 31st December 2011 (later of original filing deadline or three months from date of the notice)!
Even more interestingly ...
... from my reading of the CA 2006, if you shortened the year ended 28th February 2011 to a 1 month period ending 31st March 2010 on 30th November 2011, that one month set of accounts would be due 29th February 2012...
... but the year to 31st March 2011 would be due 31st December 2011 - two months before 31st March 2010 accounts...
... although you could extend those accounts to 30th September 2011 and buy yourself until 30th June 2012!
So, if you are nearing the filing deadline but wont finish the accounts in time, by shortening the accounts you can buy up to three months extension and preserve the option to extend within the next 5 years!!
Head hurts now so off home!