An audit is an official, in-depth review and analysis of a company’s accounting records and bank accounts. It also involves a full stock take of all assets of the business. Whilst the majority of small, privately-owned limited companies qualify for audit exemption, you may be audited if:
- it is required under the articles of association
- an audit is requested by shareholders who own at least 10% of the company’s value of issued share capital, or 10% of any class of company shares
The purpose of auditing a limited company is to confirm the accuracy of the financial transactions and figures stated in its annual accounts. It’s an excellent way to reassure HMRC and investors that you’re running a credible business with reliable accounts.
Audit exemption for ‘small’ companies
Since 6th September 2012, small and medium sized limited companies have been able to apply for audit exemption when they submit annual accounts to Companies House. A ‘small’ company qualifies for audit exemption if it meets at least two of the following criteria:
- It has an annual turnover below £10.2 million.
- It has assets worth less than £5.1 million.
- It employs fewer than 50 people.
Companies that qualify for audit exemption are permitted to file abridged accounts with Companies House. This consists of a balance sheet and notes about the accounts.
Full accounts must still be prepared for HMRC as part of the Company Tax Return. Full statutory accounts comprise a balance sheet, a profit and loss statement, a director’s report and notes relating to the accounts.
Will my limited company bank account be audited?
Your business bank account will only be audited if your company is required to submit to a full audit of its annual accounts by an independent accountant. Whilst a business bank account is not a legal requirement, we would urge you to operate one exclusively for business transactions. This will ensure complete corporate transparency, and enable you to trace and account for all business income and expenditure.
Practice good housekeeping
If you ensure that your annual accounts are accurate, you maintain proper business and accounting records, and you do not withhold any required information from Companies House or HMRC, an audit should not pose any problems for you or your company.