Do I need an audit? Should I have an audit? A simple guide for UK business owners

Determining whether your UK business requires an audit is crucial for compliance and strategic planning. This guide will help you understand the criteria and benefits associated with audits.

What is an audit?

An audit is an independent examination of your company's financial statements, and the underlying accounting records, ensuring accuracy and adherence to accounting standards. It provides and independent opinion on the truth and fairness of your financial statements and provides stakeholders with confidence in your financial integrity.

Why should we have an audit?

1. Legal requirements

In the UK, a company must conduct an audit if it meets two or more of the following criteria:

• Annual Turnover: Over £10.2 million / £15 million from April 2025
• Total Assets: More than £5.1 million / £7.5 million from April 2025
• Number of Employees: More than 50

These thresholds are outlined in the Companies Act 2006.

Certain companies are required to have an audit regardless of size, including:

• Public Companies
• Companies who are part of a medium or large group
• Financial Institutions (e.g., banks, insurance or finance companies)
• Charities
• Regulated entities

Additionally, if shareholders owning at least 10% of shares request an audit in writing, the company is obliged to have one.

2. Benefits of voluntary audits

Even if not legally required, a voluntary audit can offer significant advantages:

• Enhanced Credibility: Audited financial statements boost confidence among investors, lenders, and business partners.
• Improved Internal Controls: The audit process helps identify areas for financial and operational improvements.
• Strategic Insights: Audits provide valuable insights into business performance and potential areas for growth to assist with key decision making.
• Stakeholder Comfort: Peace of mind over the reliability of your financial statements

3. Consequences of non-compliance

Failing to have an audit when required can lead to:

• Legal Penalties: Non-compliance with statutory audit requirements can result in fines.
• Reputational Damage: Stakeholders may lose trust in the company's financial integrity.
• Operational Challenges: A lack of audited financial statements can hinder business opportunities, such as securing funding or preparing for a sale.

So what should I do next?

Understanding your company’s audit requirements is essential for legal compliance and can provide strategic benefits. If you're unsure whether you need an audit, or you’re considering a voluntary audit to enhance your business's credibility, seeking professional advice is the best next step.

At Caldwell Penn, we specialise in guiding UK businesses through the audit process, ensuring compliance and helping you unlock potential benefits.

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Speak to our expert team to assess whether your business needs an audit.

• Call us on 01252 856977
• Schedule a discovery call here