Company Accounts & Auditors UK: Filing & Audit Rules

Overview

Company accounts are the annual financial statements a private limited company must prepare, approve and file. They typically include a balance sheet, a profit and loss account, notes to the accounts, and a directors' report. Smaller companies may qualify to file abridged or filleted accounts, and micro-entities have an even lighter regime.

The accounts must give a true and fair view of the company's financial position and be prepared under either UK GAAP or, in some cases, international standards. An auditor is an independent qualified professional who examines those accounts and reports on whether they meet the legal requirements.

Not every company needs one. Small companies meeting the statutory criteria on turnover, balance sheet total and employee numbers can usually claim audit exemption, unless their articles or shareholders require an audit, or they fall into a category where exemption is not available (such as certain regulated businesses or members of ineligible groups).

Where an audit is required, the Companies Act 2006 sets out strict rules on how auditors are appointed, how they can be removed, and what documentation must sit behind those decisions.

Key steps

1. Maintain proper accounting records throughout the year. Directors must keep records that show the company's transactions, assets and liabilities with enough detail to prepare accurate annual accounts. This includes sales and purchase records, bank statements, stock records where relevant, and records of money received and spent. Failure to keep adequate records is a criminal offence under the Companies Act 2006.
2. Decide whether audit exemption applies. Check the company against the current small company thresholds for turnover, balance sheet total and average employees. If the company qualifies and no shareholder with a sufficient shareholding has requested an audit, the directors can take the exemption. The directors' report and balance sheet must carry the required exemption statements.
3. Prepare the annual accounts in the correct format. Draft the accounts using the appropriate reporting standard for the company's size. Small companies and micro-entities have simpler formats available. Make sure the notes, directors' report and any strategic report meet the disclosure requirements for the regime you are using.
4. Approve the accounts by board resolution. The directors must formally approve the accounts at a board meeting, with the approval recorded in the minutes and the balance sheet signed by a director. This step is a legal requirement, not a formality, and the minutes are the evidence that the board discharged its duty.
5. File with Companies House and circulate to members on time. Private companies generally have nine months from the accounting reference date to file accounts with Companies House. Members are also entitled to receive a copy. If the accounting reference date itself needs to change, file form AA01. Late filing triggers automatic penalties that escalate the longer the accounts are overdue.

Common questions