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Why have an audit?
Fewer limited companies have a legal obligation to have an audit as the turnover and balance sheet limits have risen but there are circumstances where you might want to invest in one anyway.
Banking covenants
Banks take a risk-based approach to their lending, so a full audit can provide comfort regarding the financial performance of the company. This could ultimately reduce your interest rate or the level of personal guarantees provided. An audit can also improve your credit rating and your credit terms with suppliers.
Selling your company
A regular annual audit will give a buyer of your business the confidence that your track record is as reported. This could reduce the level of risk for the buyer and increase the value of your company.
Audit limits
Companies currently require an audit when the turnover is greater than £5.6m or gross assets on the balance sheet (i.e without taking any account of creditors) is greater than £2.8m. If a company envisages high levels of growth or is marginally under the audit limit, it is advisable to audit the period prior to the qualifying one. An audit must report on opening balances which may require a two-year audit prior to the period under review, because an audit also reports on comparative figures.
Non-executive owners
Sometimes shareholders of the company are not involved in its day-to-day activities. An audit can provide the assurance to these shareholders that any financial statements are giving a true and fair view.