You may have heard that the statutory limits requiring businesses to conduct audits are changing soon. So, why does this matter? And what are the changes in audit limits?
It matters because if you already must have your financial statements audited, then from April 2025, you have the option not to, depending on the size of your company. We’ll look at the limits below.
Before moving on to that, let us examine what an audit is.
An audit thoroughly examines a company’s financial records and processes. Its purpose is to ensure the accuracy of financial statements and compliance with accounting standards.
As auditors, our role goes beyond simply reviewing your accounts and verifying transactions, which is a common misconception. We also examine your processes, assess your internal controls, and identify any potential risks you may face. This is where we provide added value.
When the limits are raised next year, ask yourself: do I still want to allow an independent third party to review my business and its operations annually?
On the other hand, if your business doesn’t have its financial statements checked by professionals, you might want to think about the benefits of getting an audit. An audit can provide valuable insights into your finances, but it’s also important to consider whether the costs of the audit are worth the advantages it offers.
We are serious about you and your ambitions and are here to help ensure your business works for you. Email your normal manager if you want us to examine your business processes and systems independently.
Even if this is a one-time exercise, it can provide valuable insights into your business and how it operates. It may also uncover issues you hadn’t considered, ultimately benefiting you in the long run.
Changes in Audit Limits
The current company size thresholds have been in place since 2015. However, starting from financial years that begin on or after 6 April 2025, Amendments to Companies Act will take effect, increasing the size thresholds for micro, small, and medium-sized entities.
There will be no changes to the requirements concerning the average number of employees.
This increase reflects the impact of inflation since the previous thresholds were established a decade ago. It is also part of the government initiative aimed at reducing complexity and lowering the reporting burden for businesses which is all good news.
The current and new limits are now confirmed as:
| Current Limits | New Limits | |
| Turnover | £10.2 m | £15 m |
| Balance Sheet Value | £5.1 m | £7.5 m |
| Average Number of Employees | 50 | 50 |
To qualify for an exemption, you must meet at least two of the three limits.
A company can actually be exempt from an audit even if it doesn’t meet all the usual criteria, as long as it qualified as small in the last accounting period. When looking back to determine the size of a company, there are helpful transitional arrangements in place as well.
Keep in mind that if you belong to a group of companies, the limits mentioned above apply to the entire group. Often, even if your subsidiary does not exceed the limits, the overall group may.
What should you do?
These new rules make it possible for companies to enjoy the benefits of an increased threshold sooner which could mean some savings in auditors fees. However, is it wise to halt audits?
All we can say is consider the potential risks and benefits before making that decision. Call your normal contact at Myers Clark to explore your options before you decide anything. If you are not yet working with us here’s how we work
If you decide to take advantage of the audit exemption, just remember that you’ll need to include some disclosures in the accounts and explain you are relying on those exemptions.
Also, keep in mind that any member or shareholder holding at least 10% of the company’s issued share capital, can still request an audit.
As you consider whether to use these exemptions, it’s a good idea for both members and directors to think about the potential benefits of an audit, whether it’s for peace of mind, securing financing, meeting banking requirements, or fulfilling any terms in the Articles of Association or a shareholders’ agreement.
And remember, we are here to help, so let’s talk.
If you are not a client and want to talk to one of us please email Priya who deals with new clients and she will be happy to arrange a call. Priya’s email is priyar@myersclark.co.uk