Discussion
I am looking for some advice or a second opinion really.
This year we will hit 2 of the 3 required thresholds for audit.
We are way off £10m turnover.
Our accountant has been advising us since year 1 and we are very happy with them.
Unfortunately they are not qualified to audit and we don't see any sense in being audited if we can avoid it.
It has been suggested we create a new company and move a certain number of employees to the new company. We are not looking at changing contracts or any wriggle in this regard simply reducing the number of employees in company 1. So we create company 2 which then employs say 12 staff who all perform exactly the same role.
Company 2 will then have a few extra shareholders who could benefit from a £5k dividend allocation.
Both company 1+2 will make a profit although company 2 only has company 1 as a client.
Company 1 has only 1 shareholder who would also be the majority shareholder in company 2.
It has been suggested this is perfectly fine. Both companies will I believe generate exactly the same tax liability if they had not been split so there is no tax avoidance or evasion. (Other than a dividend benefit)
Is this the most obvious audit avoiding scenario?
Have we overlooked something?
Thanks
This year we will hit 2 of the 3 required thresholds for audit.
We are way off £10m turnover.
Our accountant has been advising us since year 1 and we are very happy with them.
Unfortunately they are not qualified to audit and we don't see any sense in being audited if we can avoid it.
It has been suggested we create a new company and move a certain number of employees to the new company. We are not looking at changing contracts or any wriggle in this regard simply reducing the number of employees in company 1. So we create company 2 which then employs say 12 staff who all perform exactly the same role.
Company 2 will then have a few extra shareholders who could benefit from a £5k dividend allocation.
Both company 1+2 will make a profit although company 2 only has company 1 as a client.
Company 1 has only 1 shareholder who would also be the majority shareholder in company 2.
It has been suggested this is perfectly fine. Both companies will I believe generate exactly the same tax liability if they had not been split so there is no tax avoidance or evasion. (Other than a dividend benefit)
Is this the most obvious audit avoiding scenario?
Have we overlooked something?
Thanks
Way too excessive. What is the problem with getting an audit if the law requires it? Some business LIKE the fact that their accounts have been audited. It can actually be good for business.
You could retain your current accountants to carry out what they currently do but have a Registered Auditor go over the final figures with a view to signing off the audit report.
You could retain your current accountants to carry out what they currently do but have a Registered Auditor go over the final figures with a view to signing off the audit report.
No we have subsidiary companies that work on commission selling our products throughout EU, US and AU.
That way the stock they hold is ours until sold so on our books.
We would need to send the auditor on a rather expensive trip to audit our stocks in multiple countries and multiple sites in the US.
The audit never entered our heads when we set up the subsidiaries.
So to audit these sites will be expensive If we could avoid this then great
That way the stock they hold is ours until sold so on our books.
We would need to send the auditor on a rather expensive trip to audit our stocks in multiple countries and multiple sites in the US.
The audit never entered our heads when we set up the subsidiaries.
So to audit these sites will be expensive If we could avoid this then great
You can audit stock without having to actually attend a stock count. There are other ways of checking the validity of a stock total.
It seems that your company is growing but you don't want to up your game to cope with the additional onuses that fall on directors when the numbers get bigger.
Surely it is better that your company grows and thrives rather than getting bogged down in looking at ways to circumvent the directors' responsibilities.
It seems that your company is growing but you don't want to up your game to cope with the additional onuses that fall on directors when the numbers get bigger.
Surely it is better that your company grows and thrives rather than getting bogged down in looking at ways to circumvent the directors' responsibilities.
Countdown said:
It would be a lot simpler (IMHO) to have ONE company audited than to have TWO separate companies, each with their own PAYE, VAT, insurance, governance, accounting and reporting requirements.
This.I am conflicted though as I audit for a living.
Having an audit may benefit your company in terms of providing additional assurance to future investors, lenders, customers and suppliers. You may receive useful advice on financial systems or controls and a fresh pair of eyes looking at issues now and planning for the future may prove beneficial.
For the size of business you indicate, the marginal cost of audit is not that great, and as Eric says it may not be necessary for the main auditor to physically verify stock in all locations.
The firm I work for audits several organisations that do not require an audit by regulation as they see a benefit to the process.
zoomy said:
No we have subsidiary companies that work on commission selling our products throughout EU, US and AU.
That way the stock they hold is ours until sold so on our books.
We would need to send the auditor on a rather expensive trip to audit our stocks in multiple countries and multiple sites in the US.
The audit never entered our heads when we set up the subsidiaries.
So to audit these sites will be expensive If we could avoid this then great
If a physical audit is required (would depend on the value of stock and what other assurances the auditor can get), they could contract it out to local stock takers - in some material territories. That way the stock they hold is ours until sold so on our books.
We would need to send the auditor on a rather expensive trip to audit our stocks in multiple countries and multiple sites in the US.
The audit never entered our heads when we set up the subsidiaries.
So to audit these sites will be expensive If we could avoid this then great
Otherwise, there are other audit tests covering stock.
Alpinestars said:
zoomy said:
No we have subsidiary companies that work on commission selling our products throughout EU, US and AU.
That way the stock they hold is ours until sold so on our books.
We would need to send the auditor on a rather expensive trip to audit our stocks in multiple countries and multiple sites in the US.
The audit never entered our heads when we set up the subsidiaries.
So to audit these sites will be expensive If we could avoid this then great
If a physical audit is required (would depend on the value of stock and what other assurances the auditor can get), they could contract it out to local stock takers - in some material territories. That way the stock they hold is ours until sold so on our books.
We would need to send the auditor on a rather expensive trip to audit our stocks in multiple countries and multiple sites in the US.
The audit never entered our heads when we set up the subsidiaries.
So to audit these sites will be expensive If we could avoid this then great
Otherwise, there are other audit tests covering stock.
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