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How To Appoint An Auditor To A UK Limited Company

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Appointing_An_Auditor_To_A_UK_Limited_Company.jpgIn this blog we will focus on the various methods whereby a UK Limited Company can appoint an Auditor.

Appointment By Directors

In accordance with Section 485 of the 2006 Companies Act, an auditor must be appointed by a private company for each financial year, unless the directors reasonably conclude that audited accounts are unlikely to be required (e.g. by meeting the current audit exemption criteria).

Directors may appoint an auditor:

  • At any time before the company's first period for appointing auditors;
  • If the company had previously been exempt and did not have an auditor, at any time before the company's next period for appointing auditors; or
  • To fill a casual vacancy (e.g. previous auditor resigned or has retired).

Directors may appoint an auditor either at a board meeting or by signing a written resolution.

Related: UK Limited Companies: Accounting Periods & Deadlines

Appointment By Members

Shareholders may appoint an auditor:

  • During any period for appointing auditors;
  • If the company should have appointed an auditor during a period for appointing auditors, but failed to do so; or
  • Where the directors had power to appoint but failed to make an appointment.

Shareholders may also appoint an auditor either at a general meeting or by signing a written resolution of members.

Related: Why Choose A UK Limited Company? [Part I]

Auditor Reappointment

Once an auditor has been appointed they must be reappointed within 28 days of the following:

  • The date on which the previous year’s accounts were due to be filed – e.g. accounts for the year end 31 December 2014 are due to be filed by the 30 September 2015, therefore an auditor must be reappointed on or before 28 October 2015.
  • If filed prior to the filing deadline, 28 days after the day on which the previous accounts were submitted to Companies House – e.g. if accounts for the year end 31 December 2014 were filed with Companies House on the 2 March 2015, then an auditor must be reappointed on or before 30 March 2015.

An auditor will be deemed reappointed at the end of the accounting period if he or she was appointed by the members.

The auditor will not be automatically reappointed if:

  • He or she was appointed by the directors;
  • The company’s Articles of Association stipulate the need for yearly reappointments;
  • The directors resolve that no audit will be required for the financial year in question; or
  • The company receives notice from its members before the end of the preceding financial year that the auditor should not be re-appointed. The members in question must hold 5% of the total voting rights of all members (this percentage requirement can be lowered in the company’s Articles of Association).

Related: UK Limited Company - Statutory Requirements

Right Of Members

Even when a company matches the criteria for audit exemptions, it may still be required to prepare audited accounts. Any member or members who hold at least 10% of a company’s issued share capital can request an audit be carried out. The members must serve notice at the company’s registered office at least one month before the company’s current financial year end.

Related: UK - Holding Companies - July 2014

Fines

Unless a limited company matches the exemption criteria, an auditor must be appointed to review and prepare a report in the company’s accounts. Failure to appoint an auditor when necessary can result in fines against both the company and its directors. To avoid fines the company should ensure it remains within the exemption criteria and if not, an auditor should be appointed without delay.

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