At Drummond Laurie, we have witnessed an increase in audit enquiries from businesses who have not required an audit since the thresholds increased in 2016 or have never required an audit at all.  This is due to several factors including inflation, natural growth, exceptional growth during the Covid-19 lockdown period and the impact of Brexit on trading. 

 Audit thresholds were last amended in 2016 to: 

  • £10.2m turnover 
  • £5.1m gross assets (fixed and current assets) 
  • 50 employees 

 If companies breach 2 of these 3 thresholds for 2 consecutive years, then an audit is required for the second year.  There are separate rules in place for groups. 

 As part of the process for a first-time audit, the auditor is required to audit the opening balances, and this requires significant levels of work on your prior year accounts.  Therefore, forward planning can ensure this work is carried out in advance of the year where the audit is required, spreading the work across 2 periods and ensuring that any potential audit issues are identified.   

 Additionally, where your company holds stock, physical stock counts are required in both years. If this is not carried out in the prior year, this can lead to a qualified audit opinion which is viewed adversely by creditors, credit agencies and banks. 

 Therefore, if you think you are going to breach the audit thresholds in the current year, and you expect to repeat this in the following year, it is important to discuss this with your adviser in advance of the current year-end.