Audited Accounts: What Are They?

Audited accounts are a key part of financial reporting for many UK companies. But not every business needs one. Depending on your size, structure, and turnover, you might be exempt — or you might be legally required to undergo a statutory audit.

In this guide, we’ll explain what audited accounts are, how they differ from small company accounts, who needs an audit, and what qualifications auditors must have to carry it out legally.

What Are Audited Accounts?

Audited accounts are financial statements that have been independently examined by a qualified auditor. The purpose of the audit is to confirm whether the accounts give a true and fair view of the company’s financial position, and whether they’ve been prepared in line with the relevant accounting standards and legal requirements.

The auditor issues a report that’s submitted with the company’s annual accounts. This report can state whether the auditor agrees with the accounts or if there are concerns. It’s a formal process designed to provide reassurance to shareholders, creditors, regulators, and other stakeholders.

What Is the Difference Between Audited Accounts and Small Company Accounts?

Small company accounts are simplified financial statements that eligible companies can file without the need for an audit. They typically include a basic balance sheet and profit and loss account, often with reduced disclosures.

Audited accounts, on the other hand, involve a detailed review by an external auditor, and the financial statements must meet stricter reporting standards.

The key differences come down to:

• Who reviews the accounts: Small companies can prepare and submit their own, while audited accounts require an independent third party.

• Level of detail: Audited accounts often include more comprehensive notes, disclosures, and analysis.

• Legal threshold: Audit requirements apply only to companies above certain size or turnover thresholds.

What Are the Laws Surrounding When Accounts Need to Be Audited?

Under the Companies Act 2006, most private limited companies are exempt from audit unless they exceed certain thresholds or fall into specific categories.

A company must have its accounts audited if it meets two or more of the following:

• Annual turnover over £10.2 million

• Balance sheet total over £5.1 million

• More than 50 employees on average

If these thresholds are breached in two consecutive years, an audit becomes mandatory.

Even if a company qualifies for exemption, it may still need an audit if:

• It's part of a group that doesn’t qualify for exemption

• Shareholders representing at least 10% of shares request one

• It’s a public company or regulated by certain industries (such as financial services or charities)

Some companies also voluntarily choose to have an audit to improve credibility, especially when seeking investment or tendering for contracts.

Do Auditors Need Special Qualifications?

Yes. Auditors in the UK must be registered with a Recognised Supervisory Body (RSB) such as:

• ICAEW (Institute of Chartered Accountants in England and Wales)

• ACCA (Association of Chartered Certified Accountants)

• ICAS (Institute of Chartered Accountants of Scotland)

• Chartered Accountants Ireland

To carry out statutory audits, an individual must:

• Hold an appropriate qualification

• Be authorised to sign audit reports

• Work for a registered audit firm

Unqualified individuals or firms cannot legally perform a statutory audit.

What Companies Are Exempt from Audits?

Most small private limited companies in the UK qualify for audit exemption if they meet at least two of the following:

• Turnover not more than £10.2 million

• Balance sheet total not more than £5.1 million

• 50 employees or fewer

Companies that meet these criteria for two consecutive years can file unaudited accounts.

Certain types of companies, however, are never exempt, regardless of size. This includes:

• Public limited companies (PLCs)

• Insurance companies

• Banks

• Charities over specific income thresholds

• Companies involved in financial services or regulated industries

Final Thoughts

Understanding whether your company needs audited accounts is crucial for staying compliant and avoiding late filing penalties. While many small businesses are exempt, growing companies should regularly review their status — especially if turnover or staff numbers increase.

Audited accounts provide reassurance to stakeholders and add credibility to your financial reporting. If you’re unsure whether you need one or think your business is nearing the threshold, it’s best to get advice from a qualified accountant or audit firm.