I’m sure you are all aware that medium and large companies require an audit but smaller ones generally do not. However, did you know that there are other options available to you regarding the level of assurance we, as Chartered Accountants, can provide regarding your company’s accounts?


If you are a medium or large sized company, this is required by law.
Small companies can still choose to have an audit, but may choose one of the other options outlined below.
(In addition, holders of over 10% of the shares of a small company may request an audit, in which case one must be undertaken.)

An audit may be the best choice if:
• Your bank covenants stipulate that an audit is required (however we will talk about this further below)
• You are considering selling your business imminently and want to give potential purchasers confidence in your accounts
• You would like an impartial outside observer to review your underlying data, for your own peace of mind, particularly if your internal staff are not experienced
• You would like the added incentive for your internal staff that comes from knowing an independent outside observer will be reviewing the transactions posted throughout the year.

An audit provides an opinion over whether the financial statements are wrong to an extent that would change the way people using them would make decisions.

Assurance Review

This is a relatively new option. It provides less assurance than an audit, but more than a standard accountants’ report. Your accounts will be reviewed and if anything suggests that certain areas should be looked at in further detail, this will be done. An assurance review provides an opinion as to whether anything the reviewer has seen during their work suggests a problem with the financial statements.

This can be a useful option for small companies as:
• It still shows users that an independent party has reviewed the accounts, but, as less work is performed, it will take up less of your time compared to an audit.
• Your internal accounting staff still know that their work will be looked at by an outside, independent observer

Accounts Preparation

This is currently the standard option for most small companies who do not require an audit.

As the name suggests, accounts are “produced”:
• The figures you provide to the accountant are used to prepare a set of financial statements which comply with all the relevant statutory disclosure requirements.
• However, no opinion is given and no conclusion is drawn regarding the underlying figures.

Whilst audit is a regulated service, (so only a qualified chartered accountant who is also regulated as a registered auditor, can sign an audit report), Assurance Reviews and Accounts Production are not, so the quality of the work performed depends upon the skill, integrity & experience of the accountant you use.

For example, at Charnwood Accountants, even with Accounts Preparation jobs, we always review current year figures compared to the prior year and review any significant differences with you, the business owner, This enables us to clarify whether significant transactions have been misposted but can also help to identify areas of strength or weakness in your business. We will also always fully reconcile the Balance Sheet rather than just take the figures presented to us.

As a standard practise, we undertake the bulk of the work required for an assurance review, this is to ensure the quality of the accounts work we undertake is maintained at the highest level.

Banks’ Requirements
I mentioned above that I would talk more about banks. It is common for banks to require “audited accounts”, particularly for those companies who have significant bank loans. In the past, most such companies would already have required an audit. However, due to the increased audit thresholds it is now common that the only reason for an audit to be performed is because of the bank’s perceived requirements.

Often, although banks may stipulate an audit, their main concern is that a qualified experienced Chartered Accountant has reviewed the figures. We would therefore recommend that, if you feel you may fall into this category, you discuss this with your bank. On further discussion, they may agree that they simply want an external chartered accountant to be involved in preparing the accounts. Alternatively, they may wish us to look in further detail at specific sections or figures in the accounts. This brings us on to a final option available:

Agreed-upon Procedures
Whilst the other 3 options open to you each result in a specific report being added in to the accounts, this is a much more flexible option. In essence, you discuss with us what you want us to review and for what purposes, and we then design a work programme to meet your requirements. For example:
• You may wish us to provide a report assessing the strength of your internal controls
• You may wish to be able to provide the bank with assurance over the valuation of your stock without the need for a full audit.
• Perhaps your business has had difficulties in certain areas and you wish to be able to demonstrate that those have now been addressed.

Whatever work is performed, the resulting report will be addressed to you for your consideration. It will not be a matter of public record and does not necessarily have to be prepared at the same time as your year-end accounts.


As you can see, there are various options available to you depending upon your particular requirements – we would be happy to discuss any or all of these with you in order to be able to come up the best solution. If you have any questions, or would like to talk to us about any of these options, please call 01509 621833 to get in touch.