Audit thresholds are linked to the small company limits, which are currently set by the EU. The UK can choose to impose a lower threshold than the small company limits, but not a higher one. As a result of Brexit, power will return to the UK, and as a result the cap on audit thresholds set by Brussels could disappear.
Current audit thresholds (Periods beginning on/after 1 Jan 2016):
A company must not exceed 2 of 3 criteria below to claim exemption from audit:
- Annual turnover of more than £10.2 million
- Gross assets worth more than £5.1 million
- More than 50 employees on average
The UK has one of the highest audit exemption limits in Europe, as we have aligned our audit limits with the small companies’ threshold. Therefore, post Brexit it may choose to alter the audit limits if it deems it appropriate. The option to remove the requirement for a statutory audit for private small companies may even be available!
However there are many benefits to having an audit, such as:
- Improving efficiency and profitability
- Understanding the financial records
- Assessment of risks
- Strengthening internal control
- Enhancing credibility of financial records
- Assurance provided to external shareholders
Some organisations may require a company to have an audit even if an audit is not required by law, such as banks and lenders.