Turnover alone does not determine whether a company needs an audit. Establish the accounting period, company and group eligibility, size tests and any other requirement before planning the work. Then identify evidence that may be difficult to obtain retrospectively.
What are the small-company size thresholds?
For financial years beginning on or after 6 April 2025, the headline thresholds are turnover no more than £15 million, balance sheet total no more than £7.5 million and no more than 50 employees on average. At least two size conditions must be met, but this is not the whole exemption assessment.
The two-year qualification rules, first-year and transitional provisions, group eligibility and excluded company types can affect the conclusion. Shareholders may require an audit even where an exemption would otherwise be available. Lender, constitutional or other contractual requirements also need checking. For earlier-starting periods, different monetary thresholds apply.
How should a group assess the position?
A small subsidiary within a larger group should not assess exemption using only its own turnover. Ask for a documented group assessment. A guarantee from an overseas parent does not, by itself, meet the UK-parent condition for the section 479A subsidiary exemption. See our UK subsidiary guide for the distinction between local audit and group-auditor work.
Charities need a separate assessment
England and Wales have revised reporting and scrutiny thresholds for financial years ending on or after 30 September 2026. This differs from the SORP 2026 start-date test. Check legal form, income, assets, jurisdiction and governing or funding requirements. A company size assessment alone does not settle a charity’s audit requirement.
What needs attention before the year end?
- Discuss material inventory and the count timetable before the count occurs.
- For a first audit, identify opening-balance evidence and previous accounting records.
- Reconcile significant balances and identify who supplies supporting schedules.
- Document revenue arrangements, estimates, funding and unusual transactions.
- Agree accounts preparation, audit fieldwork, management responses and approval dates.
What if the records are not ready?
Tell the prospective auditor which areas remain unresolved. Provide a realistic completion date and name the person responsible. Additional preparation may be necessary before fieldwork can proceed. A target filing date does not remove the need for sufficient audit evidence.
Who prepares the accounts and forecasts?
Your finance team may coordinate records while an external accountant prepares the statutory accounts and related schedules. Directors retain responsibility for the accounts and going concern assessment. Agree explicitly who prepares and reviews cash-flow forecasts; they serve a different purpose from the historical cash-flow statement within annual accounts.
Audit readiness can reduce avoidable disruption, but it cannot guarantee an unmodified audit opinion or that no further questions will arise.
Sources and further guidance
Continue with our first-audit preparation guide.
Discuss your next step
Tell us your year end, reporting deadline, group structure and the issue you want to resolve. We will assess the scope, capacity and independence requirements before accepting an engagement. Discuss your audit requirements
Editorially reviewed 21 October 2026. General guidance; the appropriate approach depends on your organisation and circumstances.