Audit thresholds reminder

Audit Threshold Changes 2016

Audit thresholds for accounting periods from 1 January 2016:

Turnover £10.2 million

Balance sheet total £5.1 million

Employees average <51

For groups the limits apply to the whole group:

Turnover net £10.2 million gross £12.2 million

Balance sheet total net £5.1 million gross £6.1 million

Employees average <51

The net figures are the figures once inter group transactions have been removed and gross with them included. A company will require an audit if it meets two out of three of the following criteria for two consecutive years.


Once a company size is established, it is only lost when the limits are exceeded for two consecutive years.

There are corresponding changes to the gross criteria that apply in a group situation. As before, these are plus 20% on the thresholds for turnover and total assets.

The audit exemption does not apply if the company is ineligible. A company must have an audit if at any time in the financial year it has been:

  • a public company (unless it’s dormant);

  • a subsidiary company within a group which is not small;

  • an authorised insurance company or carrying out insurance market activity;

  • involved in banking or issuing e-money;

  • a Markets in Financial Instruments Directive (MiFID) investment firm or an Undertakings for Collective Investment in Transferable Securities (UCITS) management company; or

  • a corporate body and its shares have been traded on a regulated market in a European state.

The ineligible rules only refer to the financial year for which the accounts relate. The key is to qualify as small and then not be excluded for the relevant year.

However, there may be reasons why a company would still undertake an audit even if it met the new small company criteria, such as:

  • the constitution of the company may require it;

  • directors or shareholders may want the assurance that an audit provides;

  • the company’s lender requires an audit;

  • a grant provider requires an audit; or

  • to provide a history of audited financial statements in the event of a future sale or public offering of the business.


Entities within a group are exempt from an audit if the above limits are met across the group as a whole. There are two sets of limits for companies (net and gross), as noted above, to ease the assessment for the group. If the group does not qualify as a small group then an audit will be required for each group member, although there is an exemption for subsidiaries if they meet certain criteria and if the parent company provides a guarantee in respect of all actual outstanding liabilities and all contingent liabilities at the end of the financial year. However, given the guarantee that the parent company must provide, we have seen very few groups take up this exemption.

If you would like to discuss these changes in more detail to find out how they may affect your business accounts, please contact us on 0115 7844664 or email

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