What is a statutory audit?

A statutory audit is an independent examination of a company’s financial statements, making sure that they present a true and fair view of the company’s financial performance and position at a point in time.  An audit is designed to make sure that the financial statements are free from material misstatement, whether due to fraud or error.  Audits are designed to give confidence to the users of the financial statements such as the shareholders or external investors.

An auditor will also review the company’s Directors Report and Strategic Report, along with accounts disclosures to ensure they are both compliant with accounting standards and the Companies Act.  The auditor ensures that any wording in the accounts reflects the true position of the company and represents a fair description of the company at that point in time.

As well as complying with the legal requirements of having an audit there are lots of areas that can add value to the company such as the work undertaken on systems and controls.  During the audit, the auditor would review the financial systems and controls in place and provide recommendations and suggestions where improvements can be made.

Does my company need an audit?

A company is legally required to have a statutory audit of its financial statements if it breaches two out of the three thresholds.
Check out the handy infographic on the right which explains them:

There is a two year rule in that a company will only require an audit in the 2^nd year that the thresholds are breached. There are some instances whereby even if the company doesn’t breach the thresholds they may require an audit, such as:

• If the company is part of a medium sized group
• If shareholders who own at least 10% ask the company to have an audit
• If the company’s articles require the company to have an audit

Companies House lists various other entities that must have an audit regardless of size such as a PLC, and MiFID investment firms

https://www.gov.uk/audit-exemptions-for-private-limited-companies

Get in touch

Rayner Essex offer a wide range of audit services and with our Partner led approach ensure you receive expert care and advice. If you have any questions or would like a chat about your audit requirements, then please contact Lucy Ghawss or Alex Walsh who will be happy to help. Alternatively, please complete the form below and we will be in touch.