Can a shareholder request an audit?
Sometimes companies that are exempt from audit get a surprise: one or more of their shareholders demands an audit. But can a shareholder request an audit? And if they do, does your company have to comply? We take a closer look at these questions to give you some clarity.
When can a shareholder request an audit?
If a shareholder owns 10% or more of your company, they can request a statutory audit.
Do I have to agree to an audit?
Yes. If someone owns 10% or more of your company’s value, then you have to comply if they request an audit.
Is it the law?
Yes. The right of shareholders to request an audit is laid out in Section 476 of the Companies Act 2006.
What if my company is exempt from audit?
Even if your company is normally exempt from audit, you must arrange an audit if asked by a qualifying shareholder. This holds true regardless of your turnover, assets or size of workforce.
(For more information on audit exemptions, see Statutory audit: does my limited company need one? and Understanding the 2-year rule for audit thresholds).
Is there a process a shareholder must follow?
The Companies Act 2006 sets out the process a shareholder must follow to request an audit.
The notice must be given by:
- Members representing not less in total than 10% in nominal value of the company’s issued share capital, or any class of it, or
- If the company does not have share capital, not less than 10% in number of the members of the company.
The request must be made in writing. It has to be sent to your company’s registered address. The notice may not be given before the financial year to which it relates. Additionally, it must not be given later than one month before the end of that year.
Who pays for the audit? My company or the shareholder?
If a qualifying shareholder asks for a statutory audit, your company must pay for it.
Who appoints the auditor?
Who appoints an auditor depends on your company’s circumstances. This is covered in Section 485 of the Companies Act 2006. This is summarised in explanatory note 747 as follows:
This section restates a public company’s obligation to appoint auditors, unless it is taking advantage of exemption from audit. This is to be done by the shareholders by ordinary resolution, normally at the general meeting at which the accounts are laid. The directors can appoint the company’s first auditors (or the first after a period of audit exemption), and can fill a casual vacancy.
One or more of my shareholders have requested an audit. Can you help?
Yes, we can help. At THP we’ve been helping limited companies with audit services since the 1980s. To find out more about how we can assist, get in touch today or get an instant audit quote online.
About Andy Green
As Client Director Andy Green works primarily in delivering audit and assurance services, particularly in the Retail and Technology Sectors, as well as being the firm’s Compliance Director. These roles both bring great responsibility in ensuring that the outstanding quality and reputation of the firm is maintained.
After training and qualifying with a mid-tier firm of Chartered Accountants in the City, Andy spent some time in investment banking before joining THP in 2008, a move driven by his desire to get back into the profession. “The beauty of working for an accountancy practice is that every day is different – and you’re constantly achieving successes for your clients.” With Andy’s natural ability in interaction, THP is the ideal place.
With his positive drive and sense of humour Andy works with an array of clients, giving each the ultimate attention no matter what the size of their company.
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