Audit

Most audits are conducted under International Standards on Auditing (”ISAs”) and are required by law for certain entities, including companies incorporated under the Companies Act 2006 (”CA2006”), Charites registered with the Charities Commission and Co-operatives and Community Benefit Societies. Other audits (not conducted under ISAs) include those of solicitors under their Solicitors Accounts Rules (”SAR”) and client money audits required either by legislation or regulation, You can find out more about SAR audits in our page on solicitors. Determining whether an audit is required is not always straightforward and is detailed below.

An audit is an in-depth examination of an entities’ financial statements (and thence the underlying records) to ensure that they are free from material error. Further details of this can be found at www.frc.org.uk/auditorsresponsibilities. The audit does not relieve the directors of a company (or equivalent in other entities) of their responsibilities for keeping proper books and records and for the preparation and presentation of the financial statements. Under CA2006 the auditor is granted considerable power. He has the right of access at all times to the company’s books, accounts and vouchers (in whatever form they are held) and may require an officer, employee or anyone else accountable for any of the company’s books and records to provide such information and explanations as are thought necessary for the performance of their duties.

In practice, whilst remaining independent and objective, we work with our clients to deliver an efficient and effective outcome. An audit under the ISAs involves a whole series of mandatory processes but has three key phases:

  • Planning – typically involving a meeting with the management to review developments in the year and obtain an understanding of the business and its expected or achieved results, an assessment of the significant risks of misstatement and the delivery to ”those charged with governance” of an outline audit strategy.
  • Fieldwork – performing most of the audit work, largely on site. This includes an assessment of the accounting process and internal controls and assessing the validity, accuracy and completeness of account balances.
  • Completion – performing quality control procedures, summarsing the audit’s findings in an Audit Findings Report for discussion with ”those charged with governance” and finally signing an audit report.

Howsons have a small but experienced team of auditirs who work collaboratively with their clients seeking to minimise the impact of their audit on the day-to-day running of the entity whilst fulfilling their legal and regulatory requirements.

Meet the Team

Who needs audit?

Companies

Companies are exempt from audit under s477 Companies Act 2006 (''CA2006'') If they are ''small'' under s382-384 CA2006. A company is small if it meets two of the following three criteria for two consecutive year:

  • Turnover <£10.2 million (net) or < £12.2 million (gross)
  • Total assets < £5.1 million (net) or < £6.1 million (gross)
  • Employees < 50

Once established as small and, therefore exempt, a company will remain small until the limits are exceeded for two consecutive years. However, a company is ineligible for the audit exemption if at any time during the fiancial year it has been:

  • A public company (unless it's dormant)
  • A subsidiary within a group which is not small
  • An authorised insurance company or carrying out insurance market activity
  • Involved in banking or issuing e-money
  • A Markets in Financial Instruments Directive (''MiFID) investment firm
  • An Undertaking for Collective Investment in Transferable Securities (''UCITS'')
  • A corporate body whose shares have been traded on a regulated market in a European state
  • A member of an ineligible group

Any sized company can be exempt of its established under the law of an EEA state provided that the parent provides a guarantee (subject to many other requirements).

Even if a company is exepmt, it can still need to be audited if:

  • If members representing 10% or more of the nominal value of the company's issued share capital (or any class of it)
  • If the company does not have a share capital, if 10% in number of the members require it 
  • A lender requires it, as a condition of lending
  • The Ariticles of Association require it
  • The directors decide not to claim the exemption

Charities

Charities of any size can opt to have an audit, but under the Charities Act 2016 charities with gross income exceeding £1 million or with total assets exceeding £3.26 million and gross income exceeding £250,000 are required to have an audit.

Other circumstances in which an audit is required include:

  • The charity's constitution require one
  • Doonrs require one as a condition of the donation
  • Lender require one as a condition of lending 
  • The Charity Commission require one

Charities below the audit threshold may require an independent examination as set out in other assurance services.

Pensions

In general, all occupation pension schemes require an audit. However, there are exemptions including:

  • Schemes with less than 12 members where all the members are trustees and either all decisions are required to be made unanimous of all the trustees who are members of the scheme or the scheme has an independent trustee and is registered with the Pensions Regulator
  • Unfunded occupational pension schemes
  • Occupational pension schemes with less that 2 members

Solicitors

Solicitors require an accountant's report on their compliance with the Solicitors Regulation Authority's accounts rule unless:

  • All client money recieved from the Legal Aid Agency; or 
  • In the accounting period the statement or passbook of client money you have held or received does not exceeed an average of £10,000 and a maximum of £250,000.

Summary Regulatory Information

We are registered to carry on audit work in the UK by the Institute of Chartered Accountants in England and Wales (''ICAEW'').

Details about out audit registration can be viewed at www.auditregister.org.uk for the UK under reference C005370413.

Audit work is regulated. The Audit Regulations and Guidance can be found at www.icaew.com/technical/audit-and-assurance/regulation-and working-in-audit/working-in-the-regulated-area-of-audit/audit-regulations-and-guidance. International Standards on Auditing (UK & Ireland) and APB Ethical Standards can be found at www.frc.org.uk. 

Details of all our regulatory information are available under About Us.

To discuss our audit service, please get in touch with our Managing Director (James Eyre-Walker) or our Audit Director (James Parr) on 01782 848838 or email us using the link below.