We are a firm of statutory auditors registered to carry on audit work in the UK by the Institute of Chartered Accountants in England and Wales.
Details about our audit registration can be viewed at www.auditregister.org.uk under reference number C006030683.
By law, all UK companies require an audit. However, there are certain exemptions from this rule available based on achieving specific criteria.
Eligibility criteria for taking exemption from audit are based on the size of both the company on a standalone basis and also of any corporate group of which it is a member.
An exemption from audit is available to small companies. A company will be small if it achieves any two of the following thresholds:
- Turnover: £10.2 million or below.
- Total assets: £5.1 million or below.
- Average number of employees in the period: 50 or fewer.
If the company is non-small (ie by breaching two of the above), it will not qualify for the small company exemption.
Companies that are part of a group
If the company is small, management must then consider the size of the global group of which it is a member. ‘Group’ here refers to the consolidated position in an accounting sense, i.e. a parent company consolidated with its subsidiaries.
Where the global group exceeds any two of the three thresholds set out below, it is probable that any UK companies will require an audit:
- Turnover: Net: £10.2 million, or gross: £12.2 million.
- Total assets: Net: £5.1 million, or gross: £6.1 million.
- Average number of employees in the period: 50.
‘Net’ means after consolidation adjustments. Turnover is pro-rated for periods longer or shorter than 12 months.
A group can satisfy the relevant requirements on either a net or gross basis or a combination of the two.
Prior year rules state that two or more of these thresholds can be breached in a year and a company can still qualify as small, providing that two or more thresholds were not breached in the prior year.
Exemption for parental guarantee
UK companies with an overseas parent will be able to take an exemption from audit in certain circumstances. Such an exemption is available to UK companies with a parent company established in the European Economic Area (EEA) for periods commencing on or before 31 December 2020. Among other detailed qualifying conditions, the EEA parent company is required to give a guarantee over the subsidiary and any non-controlling interests in the subsidiary must also agree to the exemption. Where the exemption is applied, the parent company’s consolidated audited accounts must be filed on the UK public register, in English. In some cases, this will result in information going on the public record that would not otherwise be freely available, therefore advice should be sought when considering a parental guarantee.
For accounting periods commencing on or after 1 January 2021, the parental guarantee will only apply to UK subsidiaries of parent companies registered in the UK. UK subsidiaries of an EEA parent may need to be audited, unless meeting an alternative exemption.
The professional rules applicable to our audit work in the UK are the Audit Regulations which can be found at www.icaew.com/regulations. In addition there are the International Standards on Auditing (UK) at www.frc.org.uk/auditors/audit-assurance/standards-and-guidance/current-auditing-standards.
In carrying out our audit work we are subject to the Code of Ethics which can be found at www.icaew.com/en/members/regulations-standards-and-guidance/ethics. With respect to audit work we are also subject to the FRS Ethical Standards which can be found at www.frc.org.uk/auditors/audit-assurance/standards-and-guidance/current-ethical-standards.