EM2782 - Examining Accounts: Accountants and Auditors: Audit Requirement Other Conditions

In addition to the monetary limits EM2781 the following conditions apply.

  • The company still has to qualify as a small company, which is dependent on meeting a number of limits over a 2 year period, unless it is the first year of trading. There are some complex transitional provisions that we haven’t outlined here, so talk to your compliance accountant if this needs to be clarified.
  • The company must not be part of a group unless the whole group qualifies as a small group. Again the definitions can be complex so check with your local compliance accountant if necessary.
  • The company is not a public company, banking or insurance company, registered under the Financial Services and Markets Act 2000 to carry on regulated activity, or registered as a trade union or employers’ association, where there is no audit exemption. The exemption therefore will not apply to many companies in the financial services industry.
  • The company is not also a charity where lower limits apply. The whole issue of exemption for charities is under review as charities incorporated as companies have different exemption limits from other charities where the limits are lower.
  • Members have not requested an audit - shareholders holding at least 10% of the share capital can still force the company to have an audit if they wish but no other parties can force the company to have an audit.

These regulations do not relax the requirement for companies to prepare accounts, only the requirement to have them audited. Companies are still required to file full or abbreviated accounts with Companies House and to provide full accounts for their shareholders.

For up to date details on the current exemption limits and appropriate reports please see the HMRC Compliance Accountants intranet site.