Andy IrvineAudit and Accounts Partner
International businesses with UK subsidiaries must be aware of their audit obligations. Don’t risk a penalty - make sure you have an international audit plan in place.
All UK companies are required by law to undergo a statutory audit, unless they are exempt (see thresholds below); this includes UK subsidiaries of international companies.
It’s essential for UK subsidiaries to adhere to these audit obligations to maintain transparency, compliance with the law, and the confidence of shareholders and stakeholders. Non-compliance with audit obligations can result in legal and financial consequences for the company and its directors.
The audit process ensures that the financial statements present a true and fair view of the subsidiary’s financial position, performance, and cash flow (where a company is not small – see below).
Generally, if a UK subsidiary exceeds two of more of the following thresholds in its own right, they are required to be audited:
If the subsidiary does not exceed two of the above criteria, then it is considered a small company, and will not therefore require an audit. But we must also consider the wider Group (both UK and internationally) and certain other technical criteria to determine if an audit is required.
Subsidiaries that are classified as small companies must also be considered alongside their parent or group company. Regardless of whether the subsidiary exceeds fewer than two of the above criteria, they will require an audit if their global group company meets any two of the following three conditions:
In this instance, net refers to the figures after consolidation adjustments have been made. The gross figures combine individual accounts before deducting intragroup balances/transactions.
It is important to recognise that some companies will still require an audit when they are well below the thresholds set out above – therefore it is important to seek advice on your individual case from a suitably qualified accountant.
The Shorts Audit team provide valuable guidance and strategic advice, assurance, and assistance that your UK subsidiary is complying with all regulatory requirements.
What’s more? Being members of the Praxity Global Alliance enables us to provide the best solutions for companies to achieve their goals through seamless collaboration within a global alliance of leading independent business advisers.
An Audit from Shorts will not only ensure compliance with legal responsibilities; it will also deliver significant opportunities relating to the financial health of the business, including tax planning, mergers and acquisitions, and the personal taxes of company owners/directors.