laws require all incorporated businesses in the UK to have an
annual statutory external audit if the company’s annual
turnover excluding VAT exceeds £1,000,000. If your company
has a turnover of less than £1m, it is exempt and can opt
not to have an external audit.
If your company
has minority shareholders with a minimum total of 10% holding,
your shareholders can require your
company to submit
to an audit even if your company is exempt from statutory audits.
70% of eligible UK companies took advantage of this exemption
for the financial year 2001/2002. These companies used the external
audit exemption to enjoy considerable savings and freed management
resources which may be better devoted to other activities such
as building the business. Some companies however, particularly
ones, will choose to have an external audit regardless of their
exemption eligibility. Generally, the larger the company, the
are the arguments for having an external audit.
A move to increase
the exemption limit to £5.6m turnover is
being proposed by the Government. This would additionally exempt
an estimated 66,000 UK-based companies from a mandatory external