There are a variety of different businesses, organisations, and in some cases, individuals that are subject to audits, but what exactly is a ‘statutory audit’? Put simply, this is when a review of your financial accounts is required by law. The aim of this type of audit is to ensure transparency and accuracy in terms of a company or organisation’s financial health.
A statutory audit enables governing bodies to determine whether there are any discrepancies with your financial statements that could put people at risk. Although most audits of this nature tend to apply to public and financial companies, any private companies that deal with client funds, such as a legal practice, will be subject to a mandatory audit.
If you’re unsure whether your business or organisation needs to be audited by law, we have listed a few examples below:
- Public company (unless dormant) or subsidiary company (unless exempt).
- Corporate body where shares are being traded on a regulated market.
- A Markets in Financial Instruments Directive (MiFID) investment firm.
- Charitable organisation (this will depend on structure, size, income and assets).
- Bank or if you’re involved in any banking activity, including issuing electronic money (e-money).
- Insurance company or if you’re conducting any insurance market activity.
- Pensions body or funder of a master pensions scheme.
The above list is not exhaustive; there may be other types of business that require statutory audits. In most cases, the audit will need to be carried out by an external auditor who is listed on the Register of Statutory Auditors. It is also worth noting that despite the fact this type of audit is mandatory, you will be expected to pay for an external auditor’s fees. We are listed on this register and would be more than happy to discuss your auditing requirements.
From 2016, if you own or manage a private limited business, you are likely to be exempt if you have:
- Fewer than 50 employees
- Less than £10.2 million annual turnover
- Less than £5.1 million in assets
If you’re unsure about your status with regards to statutory audits, then it’s crucial to double check this with your accountant. Audits will vary depending on your type of business or organisation and may require specific reports. These usually fall into three categories:
- Accountants report – this is a financial statement prepared by your accountant.
- Assurance report – this is an accounts review focusing on any areas of issue.
- Audit report – this is an opinion on whether your accounting records are wrong.
For more information, please read our article, The difference between audit, assurance and accountants reports.
Preparing your organisation for a statutory audit relies on efficient accounts management.
Our team are highly experienced when it comes to the auditing process. Through regular management of your accounts, we will make sure your financial records and statements are always correct and compliant to ensure any audits run as smoothly as possible.
If you need advice on statutory audits or you’re unsure whether this is applicable to your company, please get in touch by emailing: accountants@charnwoodaccountants.co.uk
Sources:
Gov.uk
https://gocardless.com/guides/posts/statutory-audit/
https://www.investopedia.com/terms/s/statutory-audit.asp