Accounting and auditing FAQs

As Prime Managing Director and an audit specialist, I have 30 years’ experience and lead our expert accounting and auditing team, which carries out more than 200 audits each year for our clients. 

Here, I answer some of the most frequently asked questions about our accounts auditing services. If you have a question about your business’ accounting and auditing needs, please don’t hesitate to get in touch. 

What is auditing in accounting?

Put simply, an audit is an independent examination of the financial records of a business. 

An auditor is appointed to look at the financial statements of a company and say whether, in their opinion, the accounts of that business have been prepared in accordance with the law and give a true, fair view of the company’s financial affairs. 

What is the difference between accounting and auditing?

Accounting is the process of taking a client’s financial records and ensuring that everything fits with the formats required by the Companies Act format and for tax requirements.  

Auditing is the extra work which is completed by an independent auditor so that they can give a statement to say that the accounts are true and fair. 

Who needs to audit their accounts?

Most businesses in the UK, more than 90%, are classed as small businesses or smaller, so don’t need an audit – though some do choose to get one, as there are benefits. 

Under current rules, a private limited company is exempt from needing an audit if it meets at least two of the following criteria: 

• Annual turnover below £10.2 million 

• Assets worth no more than £5.1 million 

• 50 or fewer employees on average 

However for financial periods beginning on or after 6 April 2025 the above criteria changes to: 

• Annual turnover below £15 million 

• Assets worth no more than £7.5 million 

• 50 or fewer employees on average 

The government estimates that an additional 14,000 companies will be exempt from audit following the changes to these limits. 

Some businesses may not realise they’ve passed the threshold on two of the criteria and are now required to seek an audit, when they previously were exempt. If you’re unsure whether if your business is required to have an audit, contact our team for advice. 

Companies which do require an audit include: 

• A public company (unless it’s dormant)  

• Subsidiary companies which are part of a larger group (unless it qualifies for an exemption) 

• Other specific types of private limited companies, including those operating in the insurance industry and those involved in banking. 

If your business is part of a wider group, I’d advise speaking to the right people within the company to make sure the right decision is made about having an audit. There is a cost implication to having an audit, but if your business doesn’t get one when it should have, you could find you are in breach of company law. 

What does an audit report involve?

An audit opinion is given by qualified accountant who says that, in their opinion, the business’ accounts give a true and fair view of its finances.  

There may be circumstances where the auditor feels they can’t reach a full conclusion or where they are not fully satisfied, in which case they are able to qualify their report with context. Examples include if they have been limited in their scope or if they disagree with elements of the accounts. 

Auditors may include an ‘emphasis of matter’ paragraph in their report, to draw the readers’ attention to a point or points which they believe are important to understand or note. 

What are the benefits of an audit for my business?

An audit can be beneficial at various lifestages of your business, even if it is not legally required. 

For example, if you’re a business owner but you don’t run the company day-to-day, an audit can give a complete and proper oversight of the business’ finances. Having been audited may also help the company’s credit rating.  

If you’re thinking about selling a business, an audit can give a potential buyer the confidence that the financial statements made by the business are correct 

An audit may also be beneficial to you when working with particular suppliers or customers, as it is a way to give confidence and assurances to partners about the financial health of your business. 

If you’re thinking about future investment or borrowing for the business, an audit can give more comfort to financial backers who you may be looking to reach out to  fund your business’ ongoing growth. 

Ultimately, an audit can give a client the comfort and support of knowing that their numbers are correct, so they can confidently rely on their accuracy when using them for internal purposes. 

An audit can help an organisation to ‘get under bonnet’ and better understand their finances. It can identify any weaknesses and can help to provide proactive solutions, offering internal value from the process, as well as fulfilling the audit obligation. 

Each audit will be unique, as every company has its own audit and accounting risk. The process of an audit is to understand the risks and circumstances of each client, in order to mitigate them. 

If you’re not sure whether your company needs an audit, or whether an audit would be beneficial, our accounts auditing team will be able to advise you. 

Can I ask one accountancy firm to carry out both the accounting and auditing for my business?

Absolutely – owner-managed, private limited companies may use the same accountants for both accounting and auditing services.  

As long as there is no public interest entity to the business in question – if it is not a plc trading on the stock market – accounting and auditing companies like Prime are able to provide both services. 

We’re proud to work with many clients to address their accounting, auditing and tax planning needs. Our experience is that working this way, across these services, creates efficiencies for the client. 

It means that all of the work can be carried out in tandem, with all of the relevant information in one place, which makes for better, streamlined processes. 

When do accounts need to be audited?

If a company crosses the audit threshold, then it must be audited annually. 

What is the difference between audited and unaudited accounts?

Audited accounts are company accounts which have been examined by an independent auditor, while unaudited accounts are those which have not been subject to a third-party review from an auditor. 

Do charity accounts need to be audited?

Generally speaking, a charity will need to have its accounts independently reviewed if its gross income is more than £25,000. For those with gross income of between £25,000 and £1m, an ‘independent examination’ is required, and if gross income is above £1m then an audit is needed. 

If a charity’s gross assets are more than £3.26 million and its income is more than £250,000, then it crosses the audit threshold. 

The difference between audits for charities and other businesses is that there is increased public interest in the financial dealings of charities, and more governance required.  

If a charity is applying for a grant or donation, having independent oversight of its finances which it can share is a positive. 

Do club accounts need to be audited?

If you’re involved in the running of a club or society, you may be wondering ‘do club accounts need to be audited?’. Whether or not your club or society need to be audited depends on criteria including the number of members, your turnover and assets.  

The FCA has a decision tool on its website to help you understand if you are required to appoint an auditor.