What types of businesses are subject to auditing?
Financial statements are subject to auditing if it is one of the following:
- The company is a PLC
- The company's principal activity is regulated under Financial Services Authority
- A charity exceeded audit exempt limit
- Solicitors' firm
- A subsidiary company who parent company is listed in the stock exchange (FTSE) or Alternative Investment Market (AIM)
- Companies which either its gross assets, turnover or number of employees have exceeded the audit exempt thresholds.A company is subjected to audit if its gross assets has exceeded £2.8 million and/or its turnover has exceeded £5.6 million and/or its number of employees is more than 50.
Some companies may opt for its financial statements to be audited voluntarily to satisfy its investors requirement or financial institution's terms.
The International Standard on Auditing (ISA) provide guidance on auditing of UK companies.
What benefits can users of financial statements derived from audited financial statements compared to unaudited financial stements?
Auditors will express their opinions on the audited financial statements whether its give a true and fair view . In other words, figures included in the financial statements contain immaterial mistakes and reliable.
Qualified audit reports will be issued should the auditors have concerned and doubt on aspect of practices of the entities are not in compliance to relevant standards, law and regulations. This allow users of the financial statements especially shareholders and financial institution the indication of what should be undertaken by the directors to rectify the situations.
