Many UK subsidiaries of international businesses are unaware that they may still require an audit and that failing to arrange one when required could potentially lead to substantial penalties or even criminal proceedings.
All companies are required by law to undergo an audit in the UK, unless they meet specific requirements upon which they can take audit exemptions. To be exempt, UK companies individually must meet two of the following:
- turnover of £10.2 million or less,
- total assets of £5.1million or less, or
- an average number of 50 or fewer employees during the period.
Companies who breach two or more of the above thresholds for 2 years in a row will not qualify for exemption and it would be mandatory for them to undergo an audit.
For a company considered small, and not in breach of the above criteria, they must then look to consider the size of the overseas global group as a whole. If the overseas global group exceed any two of the following, an audit for the UK subsidiary would be required:
- net turnover of £10.2 million / gross turnover of £12.2 million
- net total assets of £5.1 million / gross total assets of £6.1 million
- an average number of 50 employees during the period.
*net being as per consolidated accounts and gross being the total of individual accounts before deducting intragroup transactions / balances. The above thresholds are for the whole worldwide groups of companies.
Companies and LLPs that are classified as dormant will also be eligible for exemption from an audit under the companies act s480 provision.
Summary
If your UK company is not eligible for audit exemption, it is important that you appoint a UK statutory auditor. They will carry out a detailed review of the accounts and disclosures, examine supporting evidence for transactions and balances, and review any changes from one year to the next. This would be collated into an audit report within the financial statements determining whether the accounts are deemed ‘true and fair’ and are free from material misstatement. It is vital to be clear on whether you are required to complete an audit to ensure you don’t get caught out and face potential penalties or criminal proceedings, which could be greatly detrimental to your business.
Get in touch
Our expert team can guide you through the complex world of regulation and compliance to ensure you meet your statutory obligation, whilst helping you make the most of your audit by gaining additional insight into your business and supporting you in achieving your goals. Get in touch to discuss our audit services in more detail by email enquiries@pmm.co.uk or calling 01254 679131.
