Statutory audits provide an independent review of an entity’s financial statements. Once statutory accounts have been prepared, a statutory audit by a qualified practitioner will result in an audit opinion in the form of an audit report.
An unqualified audit opinion concludes that the accounts show a true and fair view. If the auditor concludes that the accounts do not show a true and fair view, or there are other matters of concern which the auditor needs to report upon – a qualified audit opinion will be issued.
Companies of a certain size and companies which are public, insurance companies, involved in banking or investment firms regulated by the Financial Conduct Authority (FCA) are required by law to undertake a statutory audit.
Perrys Audit Limited is registered to carry out audit work in the UK by the Institute of Chartered Accountants in England & Wales (ICAEW firm number C008973908). Company registered in England and Wales. Registered Office: 4th Floor, 399-401 Strand, London, WC2R 0LT. Company Number 11739543.
Tailored Auditing Services for your organisation
Our exceptional approach to client relations means that we develop an understanding of individual businesses and our audit service goes beyond simply providing an audit report in relation to the financial information in the accounts.
Our statutory audit service is tailored to the best interests of each of our clients, and ensures compliance with Company Law and Financial Reporting Standards.
ICAEW Qualified & Registered
Auditors must be professionally qualified and registered as Statutory Auditors – usually through the ICAEW (Institute of Chartered Accountants in England and Wales) or ACCA (Association of Chartered Certified Accountants). As qualified & registered auditors, the Perrys team is authorised to conduct statutory audits.
Which companies must have a statutory audit?
Annual audits are a legal obligation for all companies with publicly traded shares, as well as all companies in insurance, banking and investment regulated by the Financial Conduct Authority (FCA). One of the purposes of a statutory audit is that they ensure financial transparency.
Exemptions from statutory audits
A statutory audit is not required for a company (including an LLP) if it meets two of the three criteria listed below:
- Turnover not more than £10.2 million
- Gross assets not greater than £5.1 million
- Not more than 50 employees
Circumstances can dictate that these limits are subject to adjustment or additional factors. Examples, inter alia, include:
- First period of accounts
- First period where limits are exceeded
- Companies which are part of a group
- Periods which are not exactly 12 months
There are different criteria in respect of audits for charities and other not-for-profit organisations. In addition, certain entities regulated by the FCA are subject to statutory audit irrespective of the criteria above. At Perrys Chartered Accountants, we work with our clients to ensure that they are able to fulfil their statutory obligations and file their audited accounts in an accurate and timely manner.
Our exceptional approach to client relations means that we develop a deep understanding of their individual businesses and our audit service goes beyond simply documenting and reporting the numbers.
Our tailored service offers exceptional value for money and enables us to explore the implications on the business, providing proactive advice and insight and giving recommendations on efficiency and improvement for the benefit of our clients, helping them to avoid issues in the future.
We offer expert professional services for annual audits to ensure companies meet statutory obligations. Contact Perrys Chartered Accountants today.
What information is reviewed in your audit?
Auditing puts each part of a company’s annual accounts under the microscope. For statutory accounts that means examining:
- Company information page
- Directors’ report
- Balance sheet
- Profit and loss statement
- Cash flow statement
- Notes to the accounts
The financial details will be reviewed in detail to ensure that the value of assets, liabilities, equity, profit, loss and liquidity are fairly stated. There will also be a view taken of the methods and assumptions used, and of the commentary provided in the notes.
What questions do auditors ask?
Audits are used to challenge the accounts statements in order to make sure that they show a true and fair view. This means that the financial statements are not materially misstated. The types of challenge auditors may put to businesses and their advisers are:
- Are there any issues that have high business or financial risks?
- Does the balance sheet show the company’s assets in full?
- Is the business considering any changes in accounting methods?
- Have any current or pending debts been omitted?
- Have profits or losses been properly calculated?
- Are there any matters from accounts from previous years that are not settled?
- Were there any major changes in operations this year?
- Have the operations of any subsidiaries which have a bearing on the accounts been included?
Well-prepared accounts may provide auditors with the information and validation they require to issue an unqualified audit report. However, businesses need to be prepared to supply supplementary information as required, which, ideally, will have been considered when the accounts were prepared, and should be at readily at hand.
What happens after a statutory audit?
As the process of auditing the accounts is completed, the company may need to adjust the final version in response to the auditor’s findings.
Typically, auditors will compile a list of misstatements (also known as the audit error schedule). Each error will be quantified, and adjustments proposed. Once the adjustments have been made, the auditor can confirm that the financial statements show a true and fair view.
The final part of a statutory audit usually takes the form a meeting between the auditor and the company’s directors. Known as the audit clearance meeting, there will be a discussion of the way that financial statements have been prepared, any adjustments, any ethical issues, and accounting policies. As a result, there will be absolute clarity about the financial statements and the auditor’s report.
Non Statutory Audit Reports
The majority of small private limited companies are exempt from undergoing statutory audits of their annual accounts – unless the company’s articles of association state the accounts must be audited.
Regardless of whether your company is usually exempt from a statutory audit, you must get your accounts audited if shareholders who own at least 10% of shares (by number or value) ask you to do so.
However, those businesses which are not obligated to undergo a statutory audit may still opt to be audited by a reputable independent body due to a number of benefits this can provide. A non-statutory audit report can help businesses comply with tax or banking obligations, can act as a financial health check and flag up any potential issues or areas for improvement. Our audit report will provide an independent opinion on these aspects to meet regulatory and other stakeholder requirements.
We offer expert professional services for annual statutory audits to ensure companies meet statutory obligations. Contact Perrys Chartered Accountants today.
FAQs
What are the main objectives of an audit?
- Form an opinion on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework. This means that the auditor is responsible for determining whether the financial statements are free from material misstatement, whether due to fraud or error.
- Increase the degree of confidence of users in the financial statements. The audit provides users with assurance that the financial statements are reliable and can be relied upon for decision-making purposes.
- Facilitate the compliance of the entity with laws and regulations. The audit can help to identify areas where the entity may be non-compliant with laws and regulations, and can provide recommendations for improvement.
- Detect fraud and errors. The audit is not designed to detect all fraud and errors, but it can help to identify material misstatements that may have occurred.
- Improve the efficiency and effectiveness of the entity’s internal controls. The audit can help the entity to identify weaknesses in its internal controls and to implement improvements.
What are the different types of audits?
- External audits: These are audits that are conducted by an independent third party, usually a Registered and Statutory Auditor. External audits are typically required for publicly traded companies and other organizations that are subject to government regulations.
- Internal audits: These are audits that are conducted by employees of the organization itself. Internal audits can be used to assess the effectiveness of internal controls, identify areas of risk, and improve the efficiency and effectiveness of operations.
- Compliance audits: These are audits that are conducted to ensure that the organization is complying with laws and regulations. Compliance audits can be conducted by internal or external auditors.
- Forensic audits: These are audits that are conducted to investigate fraud or other illegal activities. Forensic audits are typically conducted by external auditors who have specialized training in this area.
- Information systems audits: These are audits that are conducted to assess the security and reliability of an organization’s information systems. Information systems audits can be conducted by internal or external auditors.
- Performance audits: These are audits that are conducted to assess the efficiency and effectiveness of an organization’s operations. Performance audits can be conducted by internal or external auditors.
- Specialized audits: There are many other types of audits that are conducted for specific purposes, such as environmental audits, safety audits, and quality audits.
Who is responsible for carrying out an audit?
In the UK, the Companies Act 2006 requires that certain entities (usually large companies or regulated entities) have their financial statements audited by an independent auditor. The auditor must be a member of a recognized professional body, such as the Institute of Chartered Accountants in England and Wales (ICAEW).
The auditor is responsible for carrying out the audit in accordance with the International Standards on Auditing (ISAs). The ISAs are a set of international standards that provide guidance on how to conduct an audit.
