So you own a quirky little company with barely enough funds to buy the office cat its fancy Tuna Delight? And while you’re swimming in paperwork and Excel sheets, you’ll be stoked to know about one of the best freebies—‘Audit Exemption’. Not the glamorous kind of exemption like a VIP pass to a Beyoncé concert, but definitely worth a celebratory jig!
Skip the Snooze Fest: What is Audit Exemption?
Audit Exemption is like the ‘Get Out of Jail Free’ card in accounting terms for small companies! It means certain companies can smugly skip a statutory audit by a registered auditor. But, hold your ponies; it’s not as simple as giving an evil laugh and walking away, you must meet certain criteria.
Until October 2012, if your small company had amassed more than £1 million in turnover (round of high-fives, anyone?) or more than £1.4 million in balance-sheet glory, you could still shout ‘Exemption!’ from the rooftops. But you had to prepare a special document known as an Audit Exemption Report.
The Auditors Have Left the Building
The Audit Exemption Report was like the sacred scroll your trusty reporting accountant had to whip up. It had to answer two important existential questions:
(i) Are your accounts as truthful as your grandma? Do they align with your record books and the provisions of the Companies Act? (ii) Did your tiny enterprise truly fit the ‘small company’ bill?
But good news! 🎉 The requirement for this report vanished into thin air post-October 2012. No more sweating over those documents. Phew!
Quick Dive into the Whale vs Shrimp Discrepancy
gantt
dateFormat YYYY-MM
section Turnover & Balance Sheet
Small Business :active, a1, 2020-01, 12M
Big Corporation : a2, 2020-01, 24M
Audit Report Not Required: milestone, 2020-02, 0d
Episcopalian Confessions (Just kidding, but let’s diagram this anyway)
pie title Audit Requirements
"Yes" : 70
"No" : 30
Size Matters (At Least in Accounting)
The definition of a small company is the magic key here. If you’re a small fry binge-eating smaller than £10.2 million in turnover, or fitting into the snug £5.1 million balance sheet limit, congratulations! You are exempt (you sidestepping, fiscal Ninja, you). Let’s bullet this for dramatic effect:
- Turnover Threshold: £10.2 million
- Balance Sheet Limit: £5.1 million
- Number of Employees: Fewer than 50
Cheerful Accountants and Inspired Entrepreneurs
By dodging the audit audit, you save money and time—two things better spent on expanding your empire or buying another goldfish for that office aquarium, maybe?
Yet, no matter how you choose to spend your freed-up resources, you need to stay vigilant and accurate in your accounts—there’s no exemption from good practices.
Quizzes 🎉
Here’s to making sure you and your mates are all audit exemption experts!
- What’s an Audit Exemption?
- A reason to audit the office cat.
- A get-out-of-jail-free card for small companies, skipping the need for a statutory audit.
- Knocking off tax returns.
Correct Answer: A get-out-of-jail-free card for small companies, skipping the need for a statutory audit.
Explanation: Audit Exemption allows qualifying small companies to skip the statutory audit creating freedom to focus resources elsewhere.
- What was required before October 2012 for a small company to claim audit exemption?
- A notarized letter to the Queen.
- An Audit Exemption Report.
- Sacrificing a paperclip on the altar of accounts.
Correct Answer: An Audit Exemption Report.
Explanation: The report, prepared by a reporting accountant, ensured the accounts were consistent and that the company was indeed small-sized.
- After October 2012, what major requirement was eliminated?
- Filling out tax in triplicate.
- Submitting the Audit Exemption Report.
- Wearing multi-colored socks on audit day.
Correct Answer: Submitting the Audit Exemption Report.
Explanation: This relieved small businesses from the burden of this particular document, making the process simpler.
- What’s the current turnover threshold for a small company?
- £1 million
- £2.5 million
- £10.2 million
Correct Answer: £10.2 million
Explanation: It’s okay to be small and mighty within specified limits that ensure more businesses qualify for exemptions.
- How many employees should a company have at maximum to be eligible for audit exemption?
- Up to 15
- Fewer than 50
- Any number.
Correct Answer: Fewer than 50
Explanation: Employee count is a criterion that ensures the size and fit for exemption classification.
- Who used to draw up the audit exemption report?
- Reporting Accountant
- Chief Birthday Celebrator
- Office Cat
Correct Answer: Reporting Accountant
Explanation: Professional oversight was necessary to uphold law compliance and accounting accuracy.
- Do small companies still need to maintain accurate and truthful accounting records?
- No, they just make it up as they go.
- Yes, accuracy is still mandatory.
- Only during tax season.
Correct Answer: Yes, accuracy is still mandatory.
Explanation: What counts is consistency in good accounting practices irrespective of audit exemption.
- Is the audit exemption like having a champagne bath at work?
- Absolutely!
- No, but it’s pretty much saving lots of resources.
- Don’t be absurd.
Correct Answer: No, but it’s pretty much saving lots of resources.
Explanation: Though far from luxury, skipping an audit process does free up finances and time for a small business.
