Skip to Navigation

Does your company need an audit?

An audit involves an official inspection of a company or organisation’s accounts, initially done by an independent body.

Companies can choose to be audited to provide evidence that their accounts are accurate and in accordance with current accounting standards and legislation. While any company can come under HMRCs investigative microscope, insuring that that your accounts are correct and up to date is the best way to avoid this, or make the process as smooth as possible.

There are different accounts to file depending on the type and size of your company, so which ones apply to you?

Types of accounts

Statutory accounts

All limited companies are required to file annual ‘statutory accounts’ at the end of each financial year. These are prepared from the company’s financial records.

It is a legal obligation to send copies of your statutory accounts to:

  • all shareholders
  • people who can go to annual general meetings
  • HMRC 
  • Companies House.

Statutory accounts should include:

  • a balance sheet showing what your company owns, owes and is owed on the last day of the financial year
  • profit and loss account presenting the company’s sales, expenses and profits or losses made over the financial year
  • notes about the accounts
  • a director’s report.

Small companies

For accounting periods commencing on 1 January 2016, small companies will no longer need to submit abbreviated accounts. 

A number of new concept will be introduced:

  • filleted financial statements – full accounts with the profit and loss account and related notes removed
  • abridged financial statements – concise profits and loss account and notes which are fully consented by all members
  • micro-entity filling – submitting a balance sheet (micro-entities only).

Small companies can also qualify for an exemption meaning their accounts do not need to be audited and giving them more flexibility in sending a director’s report.

Audit process

A qualified accountant or accountancy practice can carry out an audit to ensure that your accounts and financial statements are accurate and meet with government guidelines such as UK GAAP.

There are 4 stages to an audit:

  • planning and designing the audit
  • testing the company’s financial control and evaluating the company’s record of transactions
  • analysing or testing the company’s financial records to see if they add up
  • producing an audit report.

The auditor will also check your company’s financial records so it is important that you keep the following:

  • money spent and received
  • assets owned by the company
  • debts your company is owed or owes
  • stock owned at year end
  • goods purchased and sold.

Records must be kept for a minimum of 6 years. Failure to keep your records can result in a fine up to £3,000.

Deadlines and penalties

All companies need to meet their deadlines for filing accounts to HMRC and Companies House.

If filing your accounts for the first time you need to file them 21 months after the date registered. If filing annually this is 9 months after your company’s financial year end.

If you miss the deadline you will have to pay the following penalties:

Time after deadline  Penalty
Up to a 1 month £150
1 to 3 months £375
3 to 6 months £750
More than 6 months £1,500

You can appeal against penalties but must provide a reason why you couldn’t file your accounts on time.

Contact us 

If you would like further advice on your company audits speak to one of our advisers today to find out how we can help you prepare your annual accounts.