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Audit Exemption

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Do you qualify for an audit exemption?

Although all companies and limited liability partnerships (LLPs) have to submit some form of accounts to Companies House, these accounts don't have to be audited for financial years starting before 6 April 2008 or prior to 1 October 2008 for LLPs if you:

  • qualify as a small company or LLP for the purposes of filing abbreviated accounts
  • have a turnover of no more than £5.6 million
  • have a balance sheet total of no more than £2.8 million

For financial years starting on or after 6 April 2008, to qualify for total audit exemption, a company must:

  • qualify as a small company
  • have a turnover of no more than £6.5 million
  • have a balance sheet total of no more than £3.26 million

Small and medium-sized LLPs can take advantage of the higher thresholds for accounting periods starting on or after 1 October 2008.

In these cases you can submit audited accounts if you wish, but it's not compulsory. Bear in mind there can be drawbacks. Banks, credit managers and your customers and suppliers rely on information from Companies House to assess creditworthiness and will be reassured by an independent audit. If you decide to submit audited accounts, you must appoint an auditor.

Even if a small company meets the criteria, it must still have its accounts audited if any of the following ask for an audit:

  • a member or members holding at least 10 per cent of the value of issued share capital or 10 per cent of any class of shares
  • in the case of a company limited by guarantee - 10 per cent of its members in number

Recent changes to the rules have allowed some small financial services businesses and some small businesses, such as home-finance providers, that comply with Sharia law to qualify for an audit exemption. However, businesses taking advantage of the audit exemption should be aware that shareholders who own 10 per cent or more of the company still have the right to ask for an audit.

More in this category: External vs. Internal Audit »