Audit requirement

[MrJuice]

There's a company I've been following for some years. It's only 8 years old and for first 5 years submitted abbreviated accounts to CH. Then in 2017 it submitted full audited accounts. And again this year.

The company has a t/o of 23m. 7 employees. Balance sheet of about 1.5m

Therefore it meets the criteria which would exempt it from audit

Why would a company voluntarily have itself audited? Teeing itself up for an AIM list? But being relatively new, I'd have thought aim listing would not be top priority just now

Bit perplexed. Any ideas?

[anonymous-user]

My assumption on the most likely reason would be if they wanted to sell part or all of their business at some point in the future, as having a track record of audited accounts which they can show to potential investors could be very useful.

[bga]

If they are registering to sponsor migrants on Tier 2 program then they will need audited accounts.

When I had my business, our turnover was £3-5m and we did it every year as it was something our FTSE clients preferred from their suppliers.

[Countdown]

My guess would be either they want more financing for expansion, or they’re preparing themselves for a sale.

[JBM78]

MrJuice said:

...Balance sheet of about 1.5m...

For audits, the balance sheet threshold relates to gross assets (i.e. fixed assets + current assets), not net assets.

When you say balance sheet of 1.5m, what do you mean?

[MrJuice]

JBM78 said:

For audits, the balance sheet threshold relates to gross assets (i.e. fixed assets + current assets), not net assets.

When you say balance sheet of 1.5m, what do you mean?

2016 FA+CA was 6.25m (t/o 23m, 6 employees)
2017 FA+CA was 5.38m (t/o 23.5m, 6 employees)

2016 accounts, when published, were abbreviated and unaudited.

The 2016 t/o figure above comes from the 2017 accounts which have a full set of 2016 figures in them

I don't think they need to borrow any money. This business is not a capital requiring business. They don't need fancy overseas people who'll require visas. I know one of the owners but kinda fell out with him. He's autistic and straight down the middle.

I just can't work out why they moved to audited accounts when they didn't need to

Maybe for sale purposes in a few years. That might make sense.

Hmm

[Eric Mc]

Companies House says -

For financial years that begin on or after 1 January 2016

Your company may qualify for an audit exemption if it has at least 2 of the following:

an annual turnover of no more than £10.2 million
assets worth no more than £5.1 million
50 or fewer employees on average

The important thing is that companies can still have their annual accounts audited even if they are not required to do so by law. The usual reason is because more than 10% of the shareholders have requested that the accounts undergo an independent audit. There are many reasons why they might do that.

[ninja-lewis]

MrJuice said:

JBM78 said:

For audits, the balance sheet threshold relates to gross assets (i.e. fixed assets + current assets), not net assets.

When you say balance sheet of 1.5m, what do you mean?

2016 FA+CA was 6.25m (t/o 23m, 6 employees)
2017 FA+CA was 5.38m (t/o 23.5m, 6 employees)

2016 accounts, when published, were abbreviated and unaudited.

The 2016 t/o figure above comes from the 2017 accounts which have a full set of 2016 figures in them

I don't think they need to borrow any money. This business is not a capital requiring business. They don't need fancy overseas people who'll require visas. I know one of the owners but kinda fell out with him. He's autistic and straight down the middle.

I just can't work out why they moved to audited accounts when they didn't need to

Maybe for sale purposes in a few years. That might make sense.

Hmm

That'll be why. In 2017 they had exceeded both the turnover and total assets thresholds for 2 consecutive years and therefore were no longer exempt from audit.

[MrJuice]

Right

Marvellous

Thanks everyone