It’s a question we hear regularly from business owners: 

Does my company actually need an audit? 

For many private limited companies, the answer is no. But company size is not the only consideration for an audit, even businesses that qualify for an exemption may choose to have their accounts audited for the benefit of having an independent report on the financial status and processes of their company. 

Here’s what you need to know. 

What are the current audit exemption thresholds? 

For financial years beginning on or after 6 April 2025, a private company may qualify for audit exemption if it meets at least two of the following three conditions: 

  • Annual turnover of no more than £15 million 
  • Balance sheet total of no more than £7.5 million 
  • An average of 50 employees or fewer 

These thresholds increased for financial years beginning on or after 6 April 2025, so businesses working from older figures should make sure they’re using the current limits. 

Being below the thresholds doesn’t always mean you’re exempt 

This is where things can become slightly more complex. 

Even if your company meets the size requirements, an audit may still be required. 

For example, your articles of association may require one. The shareholders can also require the company to have an audit based on their interests and opt for one. Companies House guidance states that members holding at least 10% of the nominal value of issued share capital, or 10% of any class of shares, can demand one, subject to the relevant requirements. 

There are also certain types of companies that cannot take advantage of the standard small-company audit exemption in terms of their trading activity such as brokers, institutions, those involved in forex trading are required to have statutory audits per FCA guidelines. 

Other types of businesses such as those dealing with client money also fall under audit regulations and are required to report to their own regulatory bodies with independent work carried out by a registered firm and auditor. 

 

What about groups of companies? 

If your business is part of a group, the position can be more complicated because group thresholds and eligibility rules will need to be considered. 

For accounting periods beginning on or after 6 April 2025, a group generally qualifies as small if it meets at least two of the relevant size conditions, including aggregate turnover of no more than £15 million net (£18 million gross), a balance sheet total of no more than £7.5 million net (£9 million gross), and no more than 50 employees on average. 

This is an area where it’s particularly important to assess the circumstances of the company rather than relying on a simple turnover figure. 

Group audit changes also included revised ISA 600 in which audits now have to be performed top down from group level down to the trading subsidaries 

Why would you have an audit if you don’t need one? 

An audit isn’t only about satisfying a statutory requirement. 

There are circumstances where a business may benefit from having an audit voluntarily. 

You might be: 

  • preparing to sell the business 
  • seeking external investment 
  • applying for funding 
  • planning an acquisition 
  • working with stakeholders who want additional assurance 
  • strengthening financial controls as the business grows 

An independent audit can provide greater confidence in the company’s financial reporting and potentially highlight weaknesses or areas where controls could be strengthened. 

Audit or statutory accounts – what’s the difference? 

This is another common source of confusion. 

Every limited company generally needs to prepare annual accounts, but not every limited company needs those accounts to be audited. 

For established private companies, annual accounts are normally due at Companies House within nine months of the financial year end. 

An audit is an additional process providing independent assurance over the financial statements. 

So being audit exempt does not mean you are exempt from preparing and filing accounts. 

Not sure whether your company needs an audit? 

The rules can become more complicated as businesses grow, become part of groups, take on investment or change ownership. 

Barrons has Registered Auditors who support businesses with statutory and non-statutory audits, as well as annual accounts and specialist reporting requirements. 

If you’re unsure whether your company needs an audit, or whether there could be benefits to having one voluntarily – speak to our specialist team and we’ll help you understand your position.