What is a statutory audit?

A statutory audit is an audit that is required by a government agency and does not pertain to all businesses in the UK.

For example, statutory audits are required specifically by institutions, such as banks, brokerage companies and insurance companies in the UK. This is because these types of businesses need to comply with very specific financial regulations, such as capital requirements and the regulatory agencies that oversee these businesses require a statutory audit to show UK GAAP compliance.

However, UK-registered companies may also be subject to statutory audits and business owners should check with a qualified accountant what their specific requirements are under UK GAAP and UK law. A qualified accountant or an accounting firm can easily advise you on what your specific requirements are, as well as advise you on possible regulatory and tax code changes. It is important for businesses to comply with these regulations, because non-compliance can be heavily penalised.

Also, the requirements for statutory audits do change and businesses should check the latest requirements from the HM Revenues & Customs (www.hmrc.gov.uk) to make sure they are compliant. For example, in 2012, there is no longer a requirement for Small- and Medium-sized Enterprises (SMEs) to submit to statutory audits, if they meet certain threshold requirements. Such changes are part of the government’s move to remove financial burdens from SMEs and streamline business practices. Also, in the UK, public agencies are audited by the National Audit Office (www.nao.org.uk).

Who can perform an audit?

Generally, an audit is performed by a qualified accounting firm and is an assessment of an institution or company’s financial situation. The auditor’s goal is to make sure that the financial statements issued by a company or institution are accurate and comply with UK GAAP. Statutory audits in particular will look at specific aspects of a company’s financials, to make sure that they meet government guidelines or UK GAAP code or requirements by the specific regulatory authority, such as the UK Financial Services Authority for finance-related companies. One of the main tasks is to make a financial risk assessment of the company or institution.

Many accounting firms will also offer audit assurance or audit assurance services and this means that accountants will not only audit a company’s financial statements, but also provide additional services. These services, which can also be considered consulting services, differ depending on the accounting firm and the scope needed. But generally they include:

  • a review of past financials
  • a review of accounts
  • a survey and risk assessment.

Assurance services are generally aimed at senior management or board members, who require financial information to make business decisions.

For private businesses and companies that require an auditor, need to find an appropriate and qualified auditor. These auditors can be found through the Institute of Chartered Accountants in England and Wales web-site (www.icaew.com) or at the Register of Statutory Auditors web-site (www.auditregister.org.uk).

If you need more information regarding an audit, then please contact our specialist audit and assurance team.

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