It’s important to know when a company needs to get its accounts audited. For UK subsidiaries of big global companies, this can be tricky. Let’s break down the rules for when audits are needed and how companies can make sure they follow them.
What is an audit
An audit is like a health check for a company’s finances. It’s done to make sure everything is accurate and recorded correctly. In the UK, the law says that some companies have to do audits if they meet certain conditions. These conditions include things like how much money the company makes, how many assets it has, and how many people work there.
When audits are a must
For UK companies, audits are usually needed for private limited companies that go over two or more of these limits, for two consecutive years:
- Sales over £10.2 million in a year
- Assets worth more than £5.1 million
- 50 employees
But for UK subsidiaries of international groups it isn’t that straightforward. If the company is small enough not to trigger these thresholds on its own, an audit could easily still be required. Even if the UK rules aren’t met, there might be extra requirements from the parent company. Or the parent company might still want an audit to make sure everything is in line with their standards.
If the subsidiary is a private company and the group it is part of qualifies as a small group (the same limits above apply to the group as a whole) then it may qualify for audit exemption.
Keeping up with international rules
Sometimes, UK subsidiaries have to follow international rules set by the parent company. These rules, like International Financial Reporting Standards (IFRS), might mean having to have your accounts audited even if the UK rules wouldn’t require it.
What are the benefits of having an audit
We get it – having your accounts audited just doesn’t sound like fun. Somebody else is checking up on you, and you’re having to pay an expensive fee for the privilege. But its not all bad news.
- Building trust: Audited accounts are checked by experts, making them more reliable. This helps people like investors and suppliers trust the company more. It isn’t unusual for a lender to ask for audited accounts before signing off on a loan
- Managing finances better: Auditors look closely at a company’s finances and find ways to improve how things are done. This can help the company run more smoothly and avoid mistakes
- Following the rules: Lets face it, running a company isn’t easy. Its easy to feel like you just don’t know what you don’t know. By having audited accounts, its much easier to make sure you’re following legal and regulatory requirements, making it easier to sleep at night
What do I need to do
To make sure a UK subsidiary meets audit requirements, here are some simple steps to follow:
- Stay updated: Keep an eye on any changes in UK laws and international standards that might affect audit rules
- Ask for help: Get advice from experts who know about international business and audits
- Work with the parent company: Talk to the parent company about what their requirements and timelines are
- Keep things in check: Make sure there are good systems and controls in place
Understanding when audits are needed for UK subsidiaries of big global companies can be a bit complicated. But by staying informed, getting help when needed, and working closely with the parent company, it’s possible to meet audit requirements and build trust with everyone involved.
At Starfish, we work with several UK subsidiaries of international groups, so we are well placed to help. We’re used to liaising with auditors (and used to be auditors ourselves!) and will help demystify the process to ensure your company stays on the right track.
