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STATUATORY AUDITS

This is an independent assessment of the financial accounts of a company or institution. The auditor’s role is to report on whether the financial statements are ‘true and fair’ and meet the relevant legal requirements.

Not all companies or organisations are obligated to have a statutory audit. Certain companies, regardless of their size are required to undergo a statutory audit including banks and investment firms, brokerage firms, insurance companies and public companies. Small companies are usually exempt or must meet two of the three criteria for two consecutive years:

• Turnover less than £10.2m
• Average number of employees no more than 50
• Balance sheet total no more than £5.1m

Internal audits

An internal audit is carried out to provide independent assurance that an organisation’s risk management, governance and internal control processes are operating effectively.

Internal audits look beyond financial risks and consider wider issues such as the organisation’s reputation, impact on the environment, growth and how it treats employees.

Specialist audits

Some organisations with unique reporting requirements will need a specialist audit.

BG Audit’s team of experts are trained to perform specialist audits for charities, clubs and associations, financial services schemes and solicitors.

Non-statutory audits

A non-statutory audit is an audit which is not legally required. Some charities, professional bodies, sports clubs and other organisations may be required by their internal rules to have an audit.

In certain circumstances minority shareholders can demand an audit of an audit-exempt company. An audit should give some comfort to directors, shareholders, investors, financiers, customers and suppliers alike.

UK Subsidiaries of overseas parents

The audit exemption regulations for subsidiary companies are different to individual stand-alone companies. The exemption qualification limits for turnover, assets, and average number of employees are based on the cumulative totals for the worldwide group including that subsidiary.

Therefore a number of UK companies which on the face of it qualify as a small company, will still have to have a UK statutory audit under the regulations.

BG Audit can provide a cost-effective solution for UK and overseas groups to fulfil their UK audit obligations. In many circumstances an overseas parent may have local auditors in their country of origin, but do not have access to a UK office of those auditors.

We already assist many overseas companies with their UK audit requirements, enabling them to continue their relationship with their own local auditors. BG Audit enable the UK audit requirements to be fulfilled, while liaising with the parent company’s auditors and providing them with information to enable the consolidation of the UK subsidiary in the parent group accounts, where required.

Some larger overseas companies will have group auditors with offices worldwide, but these are often among the top 10 firms in size in the UK and their fees can sometimes be substantial in relation to the size of the UK subsidiary. Being an independent firm, we are often able to provide audit services to UK subsidiaries at a more competitive level, while maintaining the relevant professional standards of audit required.

Exemptions are available for parent companies to provide a guarantee on behalf of the UK subsidiary removing the requirement for audit in the UK, however there are certain conditions required to be fulfilled. Adopting this exemption should be considered with caution as the conditions require the parent company to guarantee the liabilities of the UK subsidiary. This negates many of the benefits of limited liability available to the UK company, and possibly the commercial reasons for its incorporation in the UK in the first place. In addition, the non-audit of a UK subsidiary may not enable the group auditors to have sufficient audit evidence for group consolidation purposes.