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Audit exemption in the UK

Small and medium-sized companies and limited liability partnerships may qualify for audit exemption under UK regulations. On this page you can access a range of articles, books and online resources providing quick links to practical guides, legislation and reports.

What's on this page?

  • ICAEW guidance and support
  • Legislation and regulations
  • Online articles
  • Articles and books in the Library collection

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ICAEW guidance and support

Audit and Assurance Faculty
The faculty provides technical expertise in the field of audit and assurance within the ICAEW and is a leading UK authority on external audit, other assurance services and internal audit. It offers a range of publications (including technical releases), events and guidance.

The faculty's magazine, Audit & Beyond, produced a special edition on audit exemption threshold changes in its December 2012/January 2013 issue.

ICAEW helpsheets

The Technical Enquiry Service produces the following regularly updated guides:

Legislation and regulations

The Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015
Full text of the statutory instrument made on 26 March 2015, which came into force on 6 April 2015.

The Charities Act 2011 (Accounts and Audit) Order 2015
Full text of the statutory instrument made on 19 February 2015, which came into force on 31 March 2015. This order amends audit exemption rules for charities.

The Charities Act 2011 (Group Accounts) Regulations 2015
Full text of the statutory instrument made on 19 February 2015, which came into force on 31 March 2015. This order amends audit exemption rules for charities group accounts.

Life of a Limited Liability Partnership – GPLLP2
Guidance from Companies House which explains the criteria for subsidiaries to qualify for audit exemption. Latest version published in March 2015.



Charities: audit and independent examination
Government consultation on recommendations to increase financial thresholds for the auditing of charity accounts, including the government response published in February 2015. The consultation period closed in January 2015.


The Companies and Limited Liability Partnerships (Accounts and Audit Exemptions and Change of Accounting Framework) Regulations 2012
Full text of the statutory instrument made on 6 September 2012, which came into force on 1 October 2012.

Audit, accounting and reporting: guidance for UK companies
Information from the Department for Business, Innovation and Skills (BIS) explaining audit exemptions and the changes to the accounting framework.


Audit Exemptions and Change of Accounting Framework: Consultation and Summary of Responses
Department for Business, Innovation and Skills information with links to the regulation, responses to the consultation and consultation documents, including:


Companies Act 2006 (Amendment) (Accounts and Reports) Regulations 2008 (SI 2008/393)
Full text of the statutory instrument which put in place the new thresholds applicable for financial years beginning on or after 6 April 2008. A set of explanatory notes is also available.


Implementation of Directive 2006/46/EC on Company Reporting: Amending Accounting Directives
Government response to the consultation, published by the Department for Business Enterprise and Regulatory Reform in July 2007.

DTI consultation on amendments to the 4th and 7th Accounting Directives (ICAEW REP 46/07)
ICAEW response to the consultation document published in May 2007.

Implementation of Directive 2006/46/EC on Company Reporting: Amending the Accounting Directives
Consultative document from the DTI published in March 2007 which would see an increase in the audit exemption thresholds.


Guidance on changes to the accounting and auditing requirements for certain small financial services companies and LLPS
Updated BERR guidance that details the provisions introduced by Statutory Instrument 2006 No. 2782.

The Companies Act 1985 (Small Companies' Accounts and Audit) Regulations 2006
Statutory Instrument 2006 No. 2782, which came into force on 8th November 2006, extended audit exemption to FSA regulated small companies.

The Friendly and Industrial and Provident Societies Act 1968 (Audit Exemption) (Amendment) Order 2006
Statutory Instrument 2006 No. 265, which came into force on 6 April 2006, increased the audit exemption threshold level for industrial and provident societies to £5.6m.

FSA to end audit requirements for small firms
Press release issued by the FSA on 28 July 2006 announcing the ‘positive response from the industry’ to the proposals. A summary of the feedback received was published in Handbook Notice 57.

FSA to consult on ending audit requirements for small firms
Press release issued by the FSA on 7 April 2006. The consultation documents are available in CP06/6: Quarterly consultation (No.8). Other related documents are available from the FSA website.


POBA launches research into accounting and auditing needs of small and medium sized companies (POBA)
Press release from the Professional Oversight Board for Accountancy, published on 6th July 2005, announcing a research project focusing on small and medium sized companies which will look at the effects of recent regulatory changes including higher audit thresholds.


£5.6 million: threat or opportunity?; a guide for practitioners on the audit threshold increase
Guide published by the Audit and Assurance Faculty in August 2004.

Small and Medium Company Thresholds and Audit Exemption Thresholds
A set of FAQs prepared by Companies House on the thresholds introduced in 2004.

The Companies Act 1985 (Accounts of Small and Medium-Sized Enterprises and Audit Exemption) (Amendment) Regulations 2004
Full text of Statutory Instrument 2004 number 16.


Pre-Budget Report 2003
On 10 December 2003 the Chancellor confirmed that ‘for firms with turnovers below £5.6m there will now be no independent audit requirement’. This is outlined in Chapter 3: Meeting the productivity challenge of the Pre-Budget Report. It states that ‘where appropriate, the Government is reducing the regulatory burden and considering well-targeted exemptions’, including ‘increasing the statutory audit turnover threshold to £5.6 million – the maximum allowed under EU law – providing a further 69,000 companies with the flexibility to opt out of an independent audit’.

The Debate: The audit threshold
Article presenting opposing views on the audit threshold, published on 16 October 2003 in Accountancy Age.

Director's Views on Exemption from Statutory Audit
Research report for the DTI, also known as the Collis Report, published in October 2003.

The Beneficial Impact of Raising Audit Thresholds from £350,000 to £1,000,000
Report from the Society of Professional Accountants (SPA), published in July 2003.

Online articles

The library provides access to a range of articles in full text from leading business, finance and management journals. Access to articles is provided to logged-in ICAEW members, ACA students and other entitled users subject to suppliers' terms of use.

Articles and books in the Library collection

Selected articles

Click on the links to see our catalogue record for each article. You can obtain copies of articles through our document supply service.

Audit exemption
Company Secretary's Review, 24 September 2014, p.96
Distinguishes the rules which apply to dormant companies, small companies and subsidiary companies for purposes of qualifying to audit exemption under the Companies Act 2006 (ss 480, 477 and 479A). Inlcudes the text of the exemption statement that should be included on a company's balance sheet.

The demand for audit in private firms: recent large-sample evidence from the UK
European Accounting Review, 2014, pages 1-23
The authors examined the reasons companies choose to undergo voluntary audit, using a sample of 6274 recently exempt companies. Their results indicate that companies are more likely to purchase voluntary audits if they have greater agency costs, are riskier, wish to raise capital, purchase non-audit services from their auditor, and exhibited greater demand for audit assurance in the mandatory regime.

To find out how you can borrow books from the Library please see our guide to book loans. You can obtain copies of articles or extracts of books and reports by post, fax or email through our document supply service.

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