What is a statutory audit?
Put simply, a statutory audit is an independent assessment of the financial accounts of a company or institution. The auditor's role is to report on whether the financial statements issued by an organisation are 'true and fair', and meet all relevant guidelines or legal requirements. This in turn allows companies to guard against risk and plan for the future.
The auditing sector has been under scrutiny recently, with the government calling for reform following the collapse of high-profile firms whose audits have been called into question. Clearly it's vital that auditors recognise and report on any issues that emerge from the auditing process, so that any problems in the business can be addressed. Here at Perrys, we work with clients to provide effective and timely audits that meet and exceed all statutory obligations.
Statutory audit requirements
Not all companies or organisations must have a statutory audit. Small companies are usually exempt, unless they are charities (which must follow the specific guidelines for that sector) or members of a wider group
To be exempt from audit, a small company must meet two out of three of the following criteria for two consecutive years (or its first year for new companies):
- Turnover should not be more than £10.2m
- The balance sheet total should not be more than £5.1m
- The average number of employees should not be more than 50
It's important to note, however, that even if your company meets the criteria outlined above, there may still be cases when a statutory audit is required, for example if a shareholder, lender or grant provider requests one.
There are other exceptions to when audit exemption applies. For detailed guidance, always check with a qualified accountant with auditing expertise. There are heavy fines for failing to comply with auditing regulations, so it's important to be absolutely sure of your obligations.
Checklist of companies or organisations that require a statutory audit
Certain companies, whatever their size, are always subject to a statutory audit in order to ensure transparency and efficiency. These include:
- Banks or investment firms
- Insurance companies
- Brokerage firms
- Public companies
What happens in a statutory audit?
At Perrys, we work hard to provide an exceptional audit service, developing a deep understanding of individual businesses and offering proactive advice and insight that goes beyond the basic requirements.
Our aim is to have as minimal an impact as possible on your day-to-day business, while maintaining a thorough approach that will include inspecting documents, re-performing calculations, and sending questionnaires, surveys, checklists and reviewing and reporting on controls and systems. Ultimately this is a positive process that helps ensure best practice and future growth of an organisation.
Find out more about Perrys' auditing services
As a leading Chartered Accountants with seven branches across central London and Kent, we have many years' experience carrying out both statutory and non-statutory audits. Please contact us for in-depth advice on this subject, including whether your firm meets the government's exemption criteria.