If your club is operating as a limited company, then under the Companies Act 2006 there is no requirement for a small business to carry out an annual audit. Whilst removing this annual, sometimes considerable, cost may be appealing in the current financial climate is it something your club should consider?
The objective of an audit is to allow the auditors to form an opinion on the financial statements of a company. The audit does not relieve the directors of any of their responsibilities as they are still responsible for the preparation and presentation of the financial statements. It is not the auditors’ function to prevent fraud and/or error, this is the responsibility of the directors.
In order to reach that audit opinion, the auditors will carry out procedures to obtain evidence to provide them with reasonable assurance that the financial statements are free of material misstatement. The auditors will also ensure that the financial statements have been prepared in accordance with the relevant legislation & accounting standards.
To carry out their audit the auditors have a right of access at all times to the company’s books, accounts and vouchers (in whatever form they are held) and may require an officer or employee, or anyone accountable for any of the company’s books, to provide information or explanations as are thought necessary for the performance of the auditors’ duties.
Complying with all the above information can be time-consuming for the manager, or whoever is responsible, and some small businesses have been taking advantage of the audit exemptions contained within the Companies Act 2006.
There are several exemptions within the Act but the main one, which has recently been updated, that concerns clubs; states that a company’s annual accounts for a financial year must be audited unless the company is exempt from audit by meeting two of the following thresholds: –
- Turnover of the group must be less than £10.2million;
- Gross assets of the group must be less than £5.1 million;
- Employees of the group must be less than 50.
For audit exemption, a company must qualify as small or have qualified as small in the previous year & therefore be in a year’s grace.
If the company is part of a group, then the group, as a whole, must meet the above criteria.
However, even if a company is exempt due to the above you must get your accounts audited if shareholders who own at least 10% of shares (by number or value) ask you to. This can be an individual shareholder or a group of shareholders. They must make the request in writing and send it to the company’s registered office address. The request must arrive at least 1 month before the end of the financial year that the audit is being asked for.