The purpose of conducting an audit is to obtain an independent opinion about a company’s financial statements. This opinion provides insight into whether the company’s reports and financial statements are accurate and reliable.

What Does the Auditing Process Entail?

All companies must have an audit, except those claiming audit exemption. This refers to micro and small companies that have filed their two preceding annual returns on time. Financial activity about the company will need to be verified and the bigger the company, the longer it takes to audit. The auditor executes an opinion on whether the contents paint a fair image of the company, and that the information is true, accurate, and free from error. This is known as the auditor’s report and along with the financial statements, makes up audited accounts.

How to Determine Whether You Require an Audit or Not

As a new director/shareholder, you may be wondering whether you need to obtain an audit or if you are exempt from doing so. To find out the answer, you will have to consider the following:

The type of Company it is – Public Limited Companies and Public Unlimited Companies will always need to have their accounts audited. Interest in public companies is higher than that of private companies and stakeholders will seek more accurate and verified information. A member
of a Company Limited by Guarantee may be able to request an audit but otherwise, they can claim exemption.

The size of the Company – If your company is classified as a ‘medium’ or ‘large’ company, the financial statements will need to be audited. Your company can claim audit exemption if it is a ‘small’ or ‘micro’ company.

Whether the company has missed an annual return – If you are satisfied that your company does not require an audit, it must be ensured that the company maintains this by remaining compliant and filing its annual return every year. Failure to do so results in not only late fees payable to the CRO but also a loss of audit exemption for two years. This can happen even if your company has never traded, which is a cost that is best avoided. To ensure this never happens and to keep your company compliant, feel free to speak to the HTH Accountants team and we can assist you.

Obtaining an audit is at times necessary as seen above. It can also be beneficial to companies wishing to portray transparency, however, for new and small companies, maintaining audit exemption is important as it is an expense best avoided.

If you need more information about audited financial statements or company compliance, please do not hesitate to contact us by calling 01/5411446 or email info@hthaccountants.com.

Disclaimer: This article is for guidance purposes only. It does not constitute legal or professional advice. No liability is accepted by HTH Accountants for any action taken or not taken in reliance on the information set out in this article. Professional or legal advice should be obtained before taking or refraining from any action as a result of this article. Any and all information is subject to change.