ACCA qualified accountants<\/a>.<\/em><\/p>\nCompanies House is the regulatory body for the registration of companies and the maintenance of company records. All limited companies including Private Limited Companies (Ltd), Public Limited Companies (PLC), and Limited Liability Partnerships (LLP) are obliged to make themselves known to Companies House by law.<\/p>\n
Some limited companies consider audits simply to be an additional overhead for their business and the price they pay for the huge benefits that come hand in hand with having \u2018limited liability\u2019. However, they are a necessary undertaking \u2013 central to reassuring shareholders, creditors and lenders that the companies in which they have invested have sound accounts.<\/p>\n
According to the global accounting firm MacIntyre Hudson, 93% of complaints that are received by Companies House are related to the credibility of accounts filed by companies that are exempt from the audit procedure, indicating that though the audit procedure can be seen as an annoyance \u2013 it is an essential one.<\/p>\n
It is only limited companies that must submit an annual audit \u2013 sole traders and partnerships are not expected to do so. The three key types of limited company and their individual defining features are as follows:<\/p>\n
Private Limited Company (Ltd) (private company limited by shares)<\/h3>\n\n- Must register with Companies House and submit an audit (unless audit exempt) and Annual Return.<\/li>\n
- Liable for Value Added Tax (VAT) if turnover reaches a certain threshold.<\/li>\n
- Owned by shareholders (can operate through just one director and one shareholder).<\/li>\n
- The liability of each shareholder is limited to the amount unpaid on shares held by them.<\/li>\n
- Cannot offer shares for sale on the stock market.<\/li>\n
- Subject to Corporation Tax on profits.<\/li>\n<\/ul>\n
Public Limited Company (PLC) (public company limited by shares)<\/h3>\n\n- Must register with Companies House and submit an audit and Annual Return.<\/li>\n
- Is able to trade on the stock market if a trading certificate is obtained from Companies House.<\/li>\n
- Limits the liability of each shareholder to the amount unpaid on their shares.<\/li>\n
- Must have a minimum of two directors and a qualified company secretary.<\/li>\n
- Must have a share capital of at least \u00a350,000.<\/li>\n<\/ul>\n
Limited Liability Partnership (LLP)<\/h3>\n\n- Must register with Companies House and submit an audit and Annual Return.<\/li>\n
- Individual partners are not solely responsible for any debts run up.<\/li>\n
- Must have two or more members.<\/li>\n<\/ul>\n
Private company limited by guarantee<\/h3>\n\n- Does not have shares, members are usually guarantors not shareholders and their \u2018liability\u2019 is limited to the amount they have agreed to contribute to the company\u2019s assets.<\/li>\n
- A company structure often used by charities.<\/li>\n
- Appointment of an auditor<\/li>\n
- Auditors appointed to audit the annual accounts must be independent of the company, for example they must not be employees of your limited company or associated in any way \u2013 such as the partner of an employee.<\/li>\n<\/ul>\n
The audit itself must inspect the accuracy of the company\u2019s accountants and whether they have been prepared in accordance with Company Law (Companies Act 2006) and any additional relevant reporting framework. The aim of an audit is to establish whether or not the company\u2019s accounts present a fair view of its dealings at the end of the year.<\/p>\n
It is up to the company to appoint a suitable auditor who will carry out the procedure following the International Standards of Auditing (UK and Ireland), issued by the Auditing Practices Board. Typically the auditor will closely examine evidence that relates to amounts in financial statements, as well as assessing the estimates and judgments made by the directors of the company in preparing their financial payments.<\/p>\n
Each financial year it is up to the company to appoint an auditor to carry out this procedure. It is worth noting that the auditing procedure works slightly differently depending on the type of limited company:<\/p>\n
\n- Public Limited Companies (PLC)\n
\n- The directors of the company must appoint an auditor and they will hold office until the first meeting of the company\u2019s shareholders when the accounts are presented. The shareholders will then decide whether they wish to reappoint the current auditor or to elect a new one by passing a resolution until the next accounts meeting.<\/li>\n<\/ul>\n<\/li>\n
- Private companies\n
\n- Directors must elect the first auditor and shareholders can then reappoint an auditor each year. Shareholders can do this during a shareholders meeting, or by resolution within 28 days of receiving accounts from directors. If shareholders choose not to exercise this right the auditor selected by the directors will remain in office.<\/li>\n<\/ul>\n<\/li>\n
- Limited Liability Partnership (LLP)\n
\n- Designated members elect the first auditor, after which members can reappoint them on an annual basis within 28 days of receiving the accounts. If no vote is taken the current auditor will remain in office.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n
Audit exemption<\/h2>\n
Not all companies have to have their accounts audited and certain companies such as dormant companies or small companies may qualify for exemption.<\/p>\n
Qualifying criteria for audit exemption currently states that a company must meet two of the following:<\/p>\n