A company's first audit

Many small companies file their accounts for years without an audit.

Then the company grows, or a shareholder asks for one, and the next year's accounts have to be audited.

These notes explain what changes in that first audited year. They are based on Companies House guidance and the Companies Act 2006.

How the first audit comes about

A private company can usually skip the audit while it qualifies as small. For financial years beginning on or after 6 April 2025, a company must meet at least two of these three tests.

Annual turnover of no more than £15 million.
A balance sheet total of no more than £7.5 million.
No more than 50 employees on average.

After its first year, a company generally has to meet the tests in that year and the year before. A company that misses them for one year can usually keep its exemptions for that year. So the first audit often falls a year after the company outgrows the limits.

Shareholders holding at least 10% of the shares can also ask for an audit. They must send the request in writing to the registered office at least one month before the end of the financial year. Some kinds of company must have an audit whatever their size. GOV.UK lists them, and they include most public companies, banks and insurers.

Appointing the auditor

The directors appoint a company's first auditor. They can also appoint one after a period when the company was exempt and had no auditor.

The auditor must be registered with one of four recognised accountancy bodies. You can check a firm on the public register of statutory auditors.

Companies House suggests agreeing an engagement letter. It sets out what the audit covers and which reports the auditor will make.

What the auditor looks at

The auditor checks whether the company has kept adequate accounting records. They also check whether the accounts agree with those records.

The auditor has a right to see the company's books, accounts and vouchers at any time. They can ask officers and employees for the information and explanations they need.

It is a criminal offence to knowingly or recklessly give an auditor a statement that is misleading, false or deceptive in a material way.

What the report says

The auditor reports to the company's members. The report says whether the accounts give a true and fair view. It also says whether they were prepared properly under the company's accounting framework and the Companies Act.

A report is either unqualified or qualified. An auditor qualifies it when the work was limited, or when the auditor and the company disagree materially about the accounts.

An auditor can also draw attention to a matter without qualifying the report. The report must mention any material uncertainty about whether the company can continue as a going concern.

If the records were not adequate, the report says so. It also says so if the auditor did not get all the information they needed.

Filing the audited accounts

The auditor signs and dates the report. Where the auditor is a firm, the senior statutory auditor signs in their own name for the firm.

The copy sent to Companies House does not need a signature. It must name the audit firm and the senior statutory auditor.

Companies House lists software as the only way to file audited accounts.