14.8.2022 | Tax

Does my business need an audit?

For most small businesses, a financial audit is a distant concern. However, some sectors have seen a business boom that could mean previously exempt companies, now need an audit.

Many businesses will generally fall under the classification of a small company and therefore be exempt from an audit as long as they have a turnover of less than £10.2 million.

However, despite the challenging times we are currently experiencing, some sectors have seen a business boom, and that could mean certain businesses which have previously been exempt now need an audit.

With the demand for certain products during the pandemic and changes to customs clearance regulations as a result of BREXIT, one of the sectors to have seen an increase in demand over recent years is logistics.

As the pressure on shipping, transporting and moving goods quickly and effectively has grown, the workload on such companies has indeed been heavy.

Businesses in this area have been working incredibly hard to meet demand and grown their companies to do so. While this may ultimately mean an increased turnover and bottom line, it may also mean that an audit could now be due.

Head of Audit compliance at BG Audit Nick Marshall gives an overview of when a company might need its financial statements audited.

When is an audit needed?
It’s important to seek specific advice in relation to your business, but in broad terms, a company may require an audit if for two consecutive years it exceeds two of the following:

• An annual turnover of no more than £10.2million
• Gross Assets (fixed assets + Current assets) worth no more than £5.1million
• 50 or fewer employees on average

Be aware – shareholders can request an audit
You must get your accounts audited if shareholders who own at least 10% of shares (by number or value) ask you to. This can be an individual shareholder or a group of shareholders.

The shareholders must make the request in writing and send it to the company’s registered office address, and the request must arrive at least one month before the end of the financial year that the audit is being asked for.

Other companies that must have an audit
Certain companies must have an audit regardless of size. These include the companies where at any time in the financial year, it has been, for example:

• A public company (unless it’s dormant)
• A subsidiary company (unless it qualifies for an exemption)

Subsidiaries and groups
Although, on the face of it, a UK subsidiary company may meet the size criteria above to qualify as a small company, in order to qualify for audit exemption, the worldwide group of which it is a member must qualify as a small group in order for the UK subsidiary to remain exempt from audit.

The above gives a general overview of when a business may need to be audited. However, there is more detail to be considered when it comes to groups of companies, ineligible groups and available exemptions.

Contact Beatons if you think your business may now need an audit – or for any other audit-related advice t: 01473 659777 e: info@beatons.co.uk