Office of Public Sector Information
(1) A company’s annual accounts for a financial year must be audited in accordance with this Part unless the company—
(a) is exempt from audit under—
section 477 (small companies), or
section 480 (dormant companies);
or
(b) is exempt from the requirements of this Part under section 482 (non-profit-making companies subject to public sector audit).
(2) A company is not entitled to any such exemption unless its balance sheet contains a statement by the directors to that effect.
(3) A company is not entitled to exemption under any of the provisions mentioned in subsection (1)(a) unless its balance sheet contains a statement by the directors to the effect that—
(a) the members have not required the company to obtain an audit of its accounts for the year in question in accordance with section 476, and
(b) the directors acknowledge their responsibilities for complying with the requirements of this Act with respect to accounting records and the preparation of accounts.
(4) The statement required by subsection (2) or (3) must appear on the balance sheet above the signature required by section 414.
(1) The members of a company that would otherwise be entitled to exemption from audit under any of the provisions mentioned in section 475(1)(a) may by notice under this section require it to obtain an audit of its accounts for a financial year.
(2) The notice must be given by—
(a) members representing not less in total than 10% in nominal value of the company’s issued share capital, or any class of it, or
(b) if the company does not have a share capital, not less than 10% in number of the members of the company.
(3) The notice may not be given before the financial year to which it relates and must be given not later than one month before the end of that year.
(1) A company that meets the following conditions in respect of a financial year is exempt from the requirements of this Act relating to the audit of accounts for that year.
(2) The conditions are—
(a) that the company qualifies as a small company in relation to that year,
(b) that its turnover in that year is not more than £5.6 million, and
(c) that its balance sheet total for that year is not more than £2.8 million.
(3) For a period which is a company’s financial year but not in fact a year the maximum figure for turnover shall be proportionately adjusted.
(4) For the purposes of this section—
(a) whether a company qualifies as a small company shall be determined in accordance with section 382(1) to (6), and
(b) “balance sheet total” has the same meaning as in that section.
(5) This section has effect subject to—
section 475(2) and (3) (requirements as to statements to be contained in balance sheet),
section 476 (right of members to require audit),
section 478 (companies excluded from small companies exemption), and
section 479 (availability of small companies exemption in case of group company).
A company is not entitled to the exemption conferred by section 477 (small companies) if it was at any time within the financial year in question—
(a) a public company,
(b) a company that—
(i) is an authorised insurance company, a banking company, an e-money issuer, an ISD investment firm or a UCITS management company, or
(ii) carries on insurance market activity, or
(c) a special register body as defined in section 117(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 (c. 52) or an employers' association as defined in section 122 of that Act or Article 4 of the Industrial Relations (Northern Ireland) Order 1992 (S.I. 1992/807 (N.I. 5)).
(1) A company is not entitled to the exemption conferred by section 477 (small companies) in respect of a financial year during any part of which it was a group company unless—
(a) the conditions specified in subsection (2) below are met, or
(b) subsection (3) applies.
(2) The conditions are—
(a) that the group—
(i) qualifies as a small group in relation to that financial year, and
(ii) was not at any time in that year an ineligible group;
(b) that the group’s aggregate turnover in that year is not more than £5.6 million net (or £6.72 million gross);
(c) that the group’s aggregate balance sheet total for that year is not more than £2.8 million net (or £3.36 million gross).
(3) A company is not excluded by subsection (1) if, throughout the whole of the period or periods during the financial year when it was a group company, it was both a subsidiary undertaking and dormant.
(4) In this section—
(a) “group company” means a company that is a parent company or a subsidiary undertaking, and
(b) “the group”, in relation to a group company, means that company together with all its associated undertakings.
For this purpose undertakings are associated if one is a subsidiary undertaking of the other or both are subsidiary undertakings of a third undertaking.
(5) For the purposes of this section—
(a) whether a group qualifies as small shall be determined in accordance with section 383 (companies qualifying as small: parent companies);
(b) “ineligible group” has the meaning given by section 384(2) and (3);
(c) a group’s aggregate turnover and aggregate balance sheet total shall be determined as for the purposes of section 383;
(d) “net” and “gross” have the same meaning as in that section;
(e) a company may meet any relevant requirement on the basis of either the gross or the net figure.
(6) The provisions mentioned in subsection (5) apply for the purposes of this section as if all the bodies corporate in the group were companies.
(1) A company is exempt from the requirements of this Act relating to the audit of accounts in respect of a financial year if—
(a) it has been dormant since its formation, or
(b) it has been dormant since the end of the previous financial year and the following conditions are met.
(2) The conditions are that the company—
(a) as regards its individual accounts for the financial year in question—
(i) is entitled to prepare accounts in accordance with the small companies regime (see sections 381 to 384), or
(ii) would be so entitled but for having been a public company or a member of an ineligible group, and
(b) is not required to prepare group accounts for that year.
(3) This section has effect subject to—
section 475(2) and (3) (requirements as to statements to be contained in balance sheet),
section 476 (right of members to require audit), and
section 481 (companies excluded from dormant companies exemption).
A company is not entitled to the exemption conferred by section 480 (dormant companies) if it was at any time within the financial year in question a company that—
(a) is an authorised insurance company, a banking company, an e-money issuer, an ISD investment firm or a UCITS management company, or
(b) carries on insurance market activity.
(1) The requirements of this Part as to audit of accounts do not apply to a company for a financial year if it is non-profit-making and its accounts—
(a) are subject to audit—
(i) by the Comptroller and Auditor General by virtue of an order under section 25(6) of the Government Resources and Accounts Act 2000 (c. 20), or
(ii) by the Auditor General for Wales by virtue of section 96, or an order under section 144, of the Government of Wales Act 1998 (c. 38);
(b) are accounts—
(i) in relation to which section 21 of the Public Finance and Accountability (Scotland) Act 2000 (asp 1) (audit of accounts: Auditor General for Scotland) applies, or
(ii) that are subject to audit by the Auditor General for Scotland by virtue of an order under section 483 (Scottish public sector companies: audit by Auditor General for Scotland); or
(c) are subject to audit by the Comptroller and Auditor General for Northern Ireland by virtue of an order under Article 5(3) of the Audit and Accountability (Northern Ireland) Order 2003 (S.I. 2003/418 (N.I. 5)).
(2) In the case of a company that is a parent company or a subsidiary undertaking, subsection (1) applies only if every group undertaking is non-profit-making.
(3) In this section “non-profit-making” has the same meaning as in Article 48 of the Treaty establishing the European Community.
(4) This section has effect subject to section 475(2) (balance sheet to contain statement that company entitled to exemption under this section).
(1) The Scottish Ministers may by order provide for the accounts of a company having its registered office in Scotland to be audited by the Auditor General for Scotland.
(2) An order under subsection (1) may be made in relation to a company only if it appears to the Scottish Ministers that the company—
(a) exercises in or as regards Scotland functions of a public nature none of which relate to reserved matters (within the meaning of the Scotland Act 1998 (c. 46)), or
(b) is entirely or substantially funded from a body having accounts falling within paragraph (a) or (b) of subsection (3).
(3) Those accounts are—
(a) accounts in relation to which section 21 of the Public Finance and Accountability (Scotland) Act 2000 (asp 1) (audit of accounts: Auditor General for Scotland) applies,
(b) accounts which are subject to audit by the Auditor General for Scotland by virtue of an order under this section.
(4) An order under subsection (1) may make such supplementary or consequential provision (including provision amending an enactment) as the Scottish Ministers think expedient.
(5) An order under subsection (1) shall not be made unless a draft of the statutory instrument containing it has been laid before, and approved by resolution of, the Scottish Parliament.
(1) The Secretary of State may by regulations amend this Chapter or section 539 (minor definitions) so far as applying to this Chapter by adding, altering or repealing provisions.
(2) The regulations may make consequential amendments or repeals in other provisions of this Act, or in other enactments.
(3) Regulations under this section imposing new requirements, or rendering existing requirements more onerous, are subject to affirmative resolution procedure.
(4) Other regulations under this section are subject to negative resolution procedure.
(1) An auditor or auditors of a private company must be appointed for each financial year of the company, unless the directors reasonably resolve otherwise on the ground that audited accounts are unlikely to be required.
(2) For each financial year for which an auditor or auditors is or are to be appointed (other than the company’s first financial year), the appointment must be made before the end of the period of 28 days beginning with—
(a) the end of the time allowed for sending out copies of the company’s annual accounts and reports for the previous financial year (see section 424), or
(b) if earlier, the day on which copies of the company’s annual accounts and reports for the previous financial year are sent out under section 423.
This is the “period for appointing auditors”.
(3) The directors may appoint an auditor or auditors of the company—
(a) at any time before the company’s first period for appointing auditors,
(b) following a period during which the company (being exempt from audit) did not have any auditor, at any time before the company’s next period for appointing auditors, or
(c) to fill a casual vacancy in the office of auditor.
(4) The members may appoint an auditor or auditors by ordinary resolution—
(a) during a period for appointing auditors,
(b) if the company should have appointed an auditor or auditors during a period for appointing auditors but failed to do so, or
(c) where the directors had power to appoint under subsection (3) but have failed to make an appointment.
(5) An auditor or auditors of a private company may only be appointed—
(a) in accordance with this section, or
(b) in accordance with section 486 (default power of Secretary of State).
This is without prejudice to any deemed re-appointment under section 487.
(1) If a private company fails to appoint an auditor or auditors in accordance with section 485, the Secretary of State may appoint one or more persons to fill the vacancy.
(2) Where subsection (2) of that section applies and the company fails to make the necessary appointment before the end of the period for appointing auditors, the company must within one week of the end of that period give notice to the Secretary of State of his power having become exercisable.
(3) If a company fails to give the notice required by this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(4) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.
(1) An auditor or auditors of a private company hold office in accordance with the terms of their appointment, subject to the requirements that—
(a) they do not take office until any previous auditor or auditors cease to hold office, and
(b) they cease to hold office at the end of the next period for appointing auditors unless re-appointed.
(2) Where no auditor has been appointed by the end of the next period for appointing auditors, any auditor in office immediately before that time is deemed to be re-appointed at that time, unless—
(a) he was appointed by the directors, or
(b) the company’s articles require actual re-appointment, or
(c) the deemed re-appointment is prevented by the members under section 488, or
(d) the members have resolved that he should not be re-appointed, or
(e) the directors have resolved that no auditor or auditors should be appointed for the financial year in question.
(3) This is without prejudice to the provisions of this Part as to removal and resignation of auditors.
(4) No account shall be taken of any loss of the opportunity of deemed re-appointment under this section in ascertaining the amount of any compensation or damages payable to an auditor on his ceasing to hold office for any reason.
(1) An auditor of a private company is not deemed to be re-appointed under section 487(2) if the company has received notices under this section from members representing at least the requisite percentage of the total voting rights of all members who would be entitled to vote on a resolution that the auditor should not be re-appointed.
(2) The “requisite percentage” is 5%, or such lower percentage as is specified for this purpose in the company’s articles.
(3) A notice under this section—
(a) may be in hard copy or electronic form,
(b) must be authenticated by the person or persons giving it, and
(c) must be received by the company before the end of the accounting reference period immediately preceding the time when the deemed re-appointment would have effect.
(1) An auditor or auditors of a public company must be appointed for each financial year of the company, unless the directors reasonably resolve otherwise on the ground that audited accounts are unlikely to be required.
(2) For each financial year for which an auditor or auditors is or are to be appointed (other than the company’s first financial year), the appointment must be made before the end of the accounts meeting of the company at which the company’s annual accounts and reports for the previous financial year are laid.
(3) The directors may appoint an auditor or auditors of the company—
(a) at any time before the company’s first accounts meeting;
(b) following a period during which the company (being exempt from audit) did not have any auditor, at any time before the company’s next accounts meeting;
(c) to fill a casual vacancy in the office of auditor.
(4) The members may appoint an auditor or auditors by ordinary resolution—
(a) at an accounts meeting;
(b) if the company should have appointed an auditor or auditors at an accounts meeting but failed to do so;
(c) where the directors had power to appoint under subsection (3) but have failed to make an appointment.
(5) An auditor or auditors of a public company may only be appointed—
(a) in accordance with this section, or
(b) in accordance with section 490 (default power of Secretary of State).
(1) If a public company fails to appoint an auditor or auditors in accordance with section 489, the Secretary of State may appoint one or more persons to fill the vacancy.
(2) Where subsection (2) of that section applies and the company fails to make the necessary appointment before the end of the accounts meeting, the company must within one week of the end of that meeting give notice to the Secretary of State of his power having become exercisable.
(3) If a company fails to give the notice required by this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(4) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.
(1) The auditor or auditors of a public company hold office in accordance with the terms of their appointment, subject to the requirements that—
(a) they do not take office until the previous auditor or auditors have ceased to hold office, and
(b) they cease to hold office at the conclusion of the accounts meeting next following their appointment, unless re-appointed.
(2) This is without prejudice to the provisions of this Part as to removal and resignation of auditors.
(1) The remuneration of an auditor appointed by the members of a company must be fixed by the members by ordinary resolution or in such manner as the members may by ordinary resolution determine.
(2) The remuneration of an auditor appointed by the directors of a company must be fixed by the directors.
(3) The remuneration of an auditor appointed by the Secretary of State must be fixed by the Secretary of State.
(4) For the purposes of this section “remuneration” includes sums paid in respect of expenses.
(5) This section applies in relation to benefits in kind as to payments of money.
(1) The Secretary of State may make provision by regulations for securing the disclosure of the terms on which a company’s auditor is appointed, remunerated or performs his duties.
Nothing in the following provisions of this section affects the generality of this power.
(2) The regulations may—
(a) require disclosure of—
(i) a copy of any terms that are in writing, and
(ii) a written memorandum setting out any terms that are not in writing;
(b) require disclosure to be at such times, in such places and by such means as are specified in the regulations;
(c) require the place and means of disclosure to be stated—
(i) in a note to the company’s annual accounts (in the case of its individual accounts) or in such manner as is specified in the regulations (in the case of group accounts),
(ii) in the directors' report, or
(iii) in the auditor’s report on the company’s annual accounts.
(3) The provisions of this section apply to a variation of the terms mentioned in subsection (1) as they apply to the original terms.
(4) Regulations under this section are subject to affirmative resolution procedure.
(1) The Secretary of State may make provision by regulations for securing the disclosure of—
(a) the nature of any services provided for a company by the company’s auditor (whether in his capacity as auditor or otherwise) or by his associates;
(b) the amount of any remuneration received or receivable by a company’s auditor, or his associates, in respect of any such services.
Nothing in the following provisions of this section affects the generality of this power.
(2) The regulations may provide—
(a) for disclosure of the nature of any services provided to be made by reference to any class or description of services specified in the regulations (or any combination of services, however described);
(b) for the disclosure of amounts of remuneration received or receivable in respect of services of any class or description specified in the regulations (or any combination of services, however described);
(c) for the disclosure of separate amounts so received or receivable by the company’s auditor or any of his associates, or of aggregate amounts so received or receivable by all or any of those persons.
(3) The regulations may—
(a) provide that “remuneration” includes sums paid in respect of expenses;
(b) apply to benefits in kind as well as to payments of money, and require the disclosure of the nature of any such benefits and their estimated money value;
(c) apply to services provided for associates of a company as well as to those provided for a company;
(d) define “associate” in relation to an auditor and a company respectively.
(4) The regulations may provide that any disclosure required by the regulations is to be made—
(a) in a note to the company’s annual accounts (in the case of its individual accounts) or in such manner as is specified in the regulations (in the case of group accounts),
(b) in the directors' report, or
(c) in the auditor’s report on the company’s annual accounts.
(5) If the regulations provide that any such disclosure is to be made as mentioned in subsection (4)(a) or (b), the regulations may require the auditor to supply the directors of the company with any information necessary to enable the disclosure to be made.
(6) Regulations under this section are subject to negative resolution procedure.
(1) A company’s auditor must make a report to the company’s members on all annual accounts of the company of which copies are, during his tenure of office—
(a) in the case of a private company, to be sent out to members under section 423;
(b) in the case of a public company, to be laid before the company in general meeting under section 437.
(2) The auditor’s report must include—
(a) an introduction identifying the annual accounts that are the subject of the audit and the financial reporting framework that has been applied in their preparation, and
(b) a description of the scope of the audit identifying the auditing standards in accordance with which the audit was conducted.
(3) The report must state clearly whether, in the auditor’s opinion, the annual accounts—
(a) give a true and fair view—
(i) in the case of an individual balance sheet, of the state of affairs of the company as at the end of the financial year,
(ii) in the case of an individual profit and loss account, of the profit or loss of the company for the financial year,
(iii) in the case of group accounts, of the state of affairs as at the end of the financial year and of the profit or loss for the financial year of the undertakings included in the consolidation as a whole, so far as concerns members of the company;
(b) have been properly prepared in accordance with the relevant financial reporting framework; and
(c) have been prepared in accordance with the requirements of this Act (and, where applicable, Article 4 of the IAS Regulation).
Expressions used in this subsection that are defined for the purposes of Part 15 (see section 474) have the same meaning as in that Part.
(4) The auditor’s report—
(a) must be either unqualified or qualified, and
(b) must include a reference to any matters to which the auditor wishes to draw attention by way of emphasis without qualifying the report.
Companies Act 2006