We say ‘company accounts’, which most people take to mean the profit and loss account and balance sheet. Actually, [accountancy nerd alert] in the context of a company which needs a Statutory Audit, we are talking about “Statutory Accounts” or (perhaps more appropriately) “Statutory Financial Statements”.
Statutory Accounts are so-called because they are required by the Companies Act 2006 (CA 2006). It is a combination of this Act and the Financial Reporting Standards applicable in the UK that dictates what Statutory Accounts include and look like. As a result, Statutory Accounts are more comprehensive than just a profit and loss account and a balance sheet. In their full format, they would typically include [Deep breath…..]:
- Basic details of the company and who the Directors were during the period being reported for,
- A Directors’ report (overview of the key results and prospects of the company, and sometimes a review of the year and projection of the next year),
- An income statement (profit and loss account for just the normal trading of the business),
- A statement of comprehensive income (showing income and expenditure outside of the normal trade of the Company),
(The above 2 may be combined as one statement),
- A statement of financial position (balance sheet),
- A statement of changes in equity (changes to shareholders’ interest in the company),
- A statement of cash flow (visibility of where cash has come in from and the types of things it was spent on),
- Notes to the accounts (giving more context to the accounts and further detail on key numbers in the above statements).
If you’re bored at this point, that’s either because you’re a normal, life-loving person, or I because could have done a better job of writing, or both; but hey, it’s Accountancy and Audit, not the latest best-selling novel! I digress…
It follows that for Statutory Accounts, there is a Statutory Audit. This is also a requirement of the CA 2006. However, over 90% of companies can claim an exemption from audit by virtue of being below the audit exemption threshold. Even if a company goes above the threshold, it would have to be above it for 2 consecutive years before a statutory audit is mandatory. You may ask: What is the audit threshold? How is it defined? See this article for more information...
Has any of this helped or added any value? Have you got to the end of reading this knowing more than you did before? If so, I am really, really happy!
Are you about to have a Statutory Audit (or even a non-statutory one for that matter)? Is it your first one, and you need help preparing for it, and getting through it? Have you been through audits before, but just don’t have the time this year? If so, and if you book us in early enough, DSV Accounting can help you get through your audit.
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